In the first of a two-part series, we’ll look at the latest data from the Office for National Statistics (ONS) on UK business investment into non-financial assets, along with how these figures affect the wider economic playing field for domestic firms looking to grow during this fiscal year. Read on to discover the resultant investment opportunities presently available to your company and how to find the most suitable business finance solution to capitalize on these burgeoning markets.
Business investment – the basics
The majority of this blog will centre on the May 2018 ONS report concerning Q1 2018 UK gross fixed capital formation (GFCF), the full version of which is located here. At first glance, however, the correlation between this publication and the present status quo for UK business investment mightn’t seem obvious, so let’s first clarify some key terms before moving proceeding any further.
Put simply, GFCF represents an approximate figure for the UK’s net expenditure on capital goods – such as plant and machinery, transport, intellectual property, buildings and other structures – by both its public and private sectors. Calculating such a sweeping fiscal figure naturally requires the combination of numerous key financial factors; that’s where business investment data comes in, enabling the ONS to identify the sectors and non-financial assets which businesses across the UK have pursued in a given quarter, and in doing so improving the accuracy of their overall GFCF results.
With each quarter comes another report from the Office into the present levels of both GFCF and UK business investment. For those firms looking to expand their operations by acquiring further assets or entering hitherto unexplored markets, the reports are thus something of an informational goldmine, offering much guidance towards investment opportunities and market performance indicators.
Notable reveals from the latest ONS business investment data
Below is what stands out from the Office’s main findings for January-March (Q1)…
- Business investment dropped 0.2% between Q4 2017 and Q1 2018 to £46.1bn
- This decline contrasts with UK GFCF, which underwent a 0.9% hike – for the tenth consecutive quarter – from £84.1bn to £84.9bn during the same period
- The diminished quarter-on-quarter performance for business investment seemingly came about due to firms reducing their pursuits of non-residential buildings, structures and transport.
- That said, the report adds that flourishing investment in IT equipment, intellectual property products (IPP) and other machinery and equipment managed to offset this downward trend slightly
- Indeed, while business investment contributed negatively (by 0.1 percentage points) to UK GFCF figures in Q1 2018, the amount spent by domestic firms on non-financial assets has in fact risen by 2% to £45.2bn since Q1 2017
The ONS’ latest business investment figures speak to an increasingly turbulent environment for many UK sectors amidst Brexit uncertainty and macroeconomic factors which may have impacted upon the construction sector’s 1.7% decline in Q1 and so on coinciding business investment data. When considering the retail sector for example, that key high street players like Homebase, Marks & Spencer and Carphone Warehouse have closed stores to ensure their survival is likely to have factored into the underwhelming investment in commercial property and transport investment between January and March.
However, May’s bank data suggested that UK business confidence reached its highest level since January, pointing to optimism for businesses looking to grow their investment campaigns.
Taking the initiative to capitalise
There’s ample incentive for businesses to take advantage of those non-financial assets which saw renewed investment between January and March. With machinery and equipment ranked among the highest contributors to UK business investment’s Q1 successes, this indicates that manufacturing and wholesale firms stand to gain from pursuing new technologies for use in their factories or for parts of their supply chain network. What’s more, if other players in your field are already investing in this equipment, then failing to do likewise imminently could prove costly as your customers begin looking elsewhere for higher quality provisions or goods.
Another business route could be to capitalise on the new window of opportunity created from the recent GDPR launch and related mater of cyber security breach prevention. The UK’s digital wall is seemingly quite secure according to ComputerWeekly data, which showed that UK firms claimed to feel less vulnerable to data threats despite an increased number of attacked compared to those in 2017.
With the GDPR’s implementation raising the prospect of steep fines for any businesses failing to comply with data protection law, IT firms may need to consider whether their hardware offerings and other patented technology could take advantage of the situation and develop offerings for enhanced information security or enhanced license agreements. Indeed, pursuing intellectual property products (IPP) could prove particularly fruitful given that these contributed 0.3 percentage points to GFCF growth in Q1 2018 per the ONS’ data.
Locating the right business finance solution for investment
Whether or not the aforementioned investment case scenarios appeal to your firm in the weeks and months ahead, setting aside the necessary funding to fuel one or more of these ventures isn’t always the simplest of moves if your business assets or customer base are still being developed. Perhaps now is the time to consider a business finance solution, then; read on below for details of different cashflow support facilities which can help boost your working capital in order to make those case scenarios a reality…
- If you’re a manufacturing firm that wants to invest in new equipment or machinery for your factory, asset finance could prove a particularly invaluable business finance solution. This arrangement comes in numerous forms, but if it’s a permanent investment which you want to pursue, then hire purchase lets you spread the cost of an asset – such as a new production machine or vehicle for deliveries – over a pre-agreed length of time via structured payment instalments, as opposed to having to pay one excessive lump sum from the outset and risk your ability to pay staff or supply chain partners in the process.
- As for IT firms attempting to develop new software / IPP or equipment for their current – and potential future – customers’ GDPR-orientated needs, one constraint could be if your business suffers from late payments, often finding itself held back from investing in emerging technology by having to wait 30-120 days for the requisite funds to arrive. Enter invoice finance, a cashflow facility which allows IT firms to submit an invoice for completed work to their chosen funder then receive a high percentage of the invoice’s value within just 24 hours and start investing elsewhere immediately. We would recommend that any business owner interested in learning more about the different business finance solution offerings available for the IT sector consult our dedicated guide on the subject today.
- In the event that you’re considering a marketing campaign to highlight overlooked assets such as transport and encourage further business investment in these areas, then it’s worth bearing in mind the benefits of an unsecured business loan. The flexible nature of this facility essentially means that you’re free to focus on promoting such products for as short or long a window of time as you choose, with the instalments that you’ll repay also set in advance with a funder so that you’re not caught unaware either.
Find the right business solution today
We hope that you’ve found this blog useful as both an insight into the UK business investment playing field and introduction to the different types of business finance solution available to your firm right now. Get in touch today and one of our expert team of consultants will be happy to help answer any of your queries or find the facility best suited to helping your business make successful investments of its own this fiscal year.