I’ve spent much of my career providing banking services to the UK manufacturing sector and I speak with manufacturers up and down the country every week. There’s no doubt that the sector has a strong appetite for innovation and growth.
At Allica Bank we recently surveyed 450 business owners to gauge this appetite. Two-thirds of those we spoke to are hoping to raise investment finance during 2025, while nearly half are looking to invest in emerging technologies in search of efficiencies.
A recurring frustration that emerges in my conversations with food manufacturers however is that despite being viable businesses with huge potential, they struggle to access the finance they need to support these ambitions.
There are nearly 5,000 food and beverage manufacturers across the country classed as established SMEs. That is, those businesses employing between five and 250 staff and exactly the types of business Allica is committed to supporting. These businesses are the backbone of the industry and vital employers in communities across the country.
All too often however the story I hear from these businesses is that they are being overlooked by high-street banks. The big six banks often focus instead on competing for larger, corporate firms at the expense of these established SMEs because it’s much more cost effective for them to do so. This is having a very real impact on the food manufacturers I speak to.
High-street, low interest
One example of how this is impacting established SMEs in the food manufacturing sector is ‘lost interest’. In their competition for larger manufacturers, high-street banks offer these businesses preferential interest rates unavailable to established SMEs. In fact, rates offered to big business are on average 3% higher than those offered to established SMEs, according to research from Allica.
The wider SME population of the UK has around £122 billion deposited in a low-interest savings account with a high street bank earning less than they would if they were a big business. Our research also showed that SMEs have £126 billion in cash reserves not earning any interest at all. It means that these businesses are collectively missing out on £9 billion of interest every year.
For the UK’s five-thousand established SME food manufacturers, this amounts to around £25 million in lost interest annually and potentially much more considering established businesses often have more excess cash stored away. This is vital cash that could otherwise be invested in automation, training, new staff or expansion.
It’s no surprise then that just 41% of business owners we surveyed believe they get the business banking they need from their bank. Worse still, 47% told us they receive no interest at all on their business savings, meaning valuable capital is sitting idle rather than working for them.
Over the course of my years working with manufacturing businesses on their banking and access to finance, I’ve seen first-hand how high-street banks have become more reluctant to support established SMEs. Whether that’s with a decent rate of return or lending. This experience has also given me a clear perspective, however, on what manufacturers can do to access better business banking.
Banking on the UK’s food manufacturers
As anybody who works in banking will attest, the story of the financial sector in recent years has been about fragmentation and diversification. Mainstream banks may no longer offer the kind of relationship driven business banking they once did, but there are other banks out there who will.
Our own success at Allica has been driven by our willingness to take the time to understand the complexities of food manufacturing businesses – complexities that high-street lenders would rather avoid. Taking this time and working closely with manufacturers to understand their unique situations and objectives can lead to new financing opportunities. Borrowing unsecured or against machinery, property and other assets for example could unlock vital capital that can be reinvested for growth.
When I started out in banking, business advice and a banking relationship manager were key features of business banking. This is something else that high-street banks have pulled back from, especially for established SMEs. In my experience, while relationship driven business banking is a less tangible benefit than finance or higher interest-rates, it’s a vital service that can help steer a business toward success.
Again, by looking beyond the big six banks, manufacturing business leaders can still access this kind of banking.
Investments in innovation, people and production are going to be key to the ongoing success of UK food manufacturing. Banks have a role to play when it comes to supporting the whole sector, not just the corporate end of the market. Business owners too shouldn’t stick with banks where they’re being underserved. Shopping around could be an easy win when it comes to unlocking investment, interest and advice.
