Investec, evolution of SMEs in the materials handling sector – Leasing Life

The past decade has been marked by many challenges and uncertainties for SMEs from interest rate fluctuations and supply chain disruption to a global pandemic, geopolitical conflicts, and extreme weather. And lets not forget the game-changing rise of artificial intelligence, reshaping business right before our eyes.

The unexpected has become expected a given, almost. What is surprising, though, is the resilience the materials handling sector has demonstrated despite all this. This industry has become a reliable cornerstone for businesses needing warehousing and distribution.

As we celebrate the 10th anniversary of Investecs presence in the UK materials handling market, we reflect on five megatrends that have shaped the recent past and consider the challenges and opportunities they are likely to present for businesses needing asset financing in future.

The surge in e-commerce has been a transformative force for materials handling and asset finance more generally. The shift in consumer spending towards online shopping has propelled internet sales[1]from 11.3% in 2014 to a staggering 26.6% in 2024, with the UK e-commerce market expected to reach $750.80 billion by 2029[2]. The demand for efficient warehousing and distribution solutions has skyrocketed as a result, leading to a substantial increase in forklift sales globally.

Financing has been and will continue to be key in empowering businesses to adapt to this changing retail landscape and capitalise on opportunities.

In the current challenging economic environment, we expect tailored financing solutions, including stage payments, to prove instrumental in addressing cashflow challenges and play a crucial role in securing good deals, particularly when purchasing overseas assets.

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Against the backdrop of a global shortage of skilled labour, the materials handling industry embraced automation to streamline processes and reduce operational costs. Conveyor systems and automated robots have become the norm and projections paint a promising picture for the UKs robotics market, estimating a revenue of US$1.48bn by 2024[3]. The use of automated robots in warehouses to enable just-in-time production is set to rise, promising increased productivity, accuracy, and safety.

End consumers now expect everything to be frictionless and speedy as standard. SMEs therefore need the same from their lending partner to be able to deliver. Recognising this, Investec has invested significantly to ensure our teams can turn around deals as quickly as possible in days or sometimes hours.

When it comes to financing investment in automation, bespoke debt structures, including asset-based lending and cashflow strategies, or a combination of both, should be considered. A strategic financial partner can assist in effectively navigating through these challenges.

The integration of the Internet of Things (IoT) and data analytics has revolutionised how materials handling operations are managed. Real-time tracking, predictive maintenance, and data-driven decision-making have become integral components of the industry.

For example, Investec gathers data on behalf of its clients that helps to protect and promote their business. We can show them every deal theyve done with us, who the customer was, whether any are in arrears and how their portfolio has performed over time.

SMEs who fail to make the most of the information available to them will struggle to remain competitive in this data-centric era.

At the same time, environmental concerns have risen towards the top of the business agenda. With warehouses among the biggest emitters of fossil fuels, companies in materials handling are stepping up replacing equipment and shifting to sustainable practices.

We hear from our clients that this move is not just about meeting regulatory standards but also about responding to consumer demands and internal expectations.

As a result, Investec Asset Finance is seeing increasing demand from clients for financing initiatives that improve green credentials, diversify their business, and save on energy costs. This includes investments in solar panels, biomass energy, onshore wind, and heat pumps, and more.

The materials handling industry has grappled with supply chain disruptions in recent years. In such a dynamic environment, financial partners need to be nimble in swiftly adapting to changing circumstances for their clients.

For example, when the Covid-19 pandemic broke out, Investec promptly offered a six-month forbearance to clients to help mitigate the impact of supply chain challenges. This kind of responsiveness is especially crucial during a period marked by economic instability and global unrest, where rising prices and trading obstacles are increasingly prevalent.

While these five trends will continue to be key in driving change within materials handling businesses must be prepared for others to join that list. Trying to predict which new technologies or black swan events will shape the industry in future is a fools game. Instead, both SMEs and their lending partners should focus on ensuring they are nimble enough and resilient enough to meet any challenge and finding within that the opportunities.

Notes:

[1]UK State of Commerce ecommerce trends report 2023 | Signifyd

[2]Internet sales as a percentage of total retail sales (ratio) (%) Office for National Statistics (ons.gov.uk)

[3]https://www.statista.com/outlook/tmo/robotics/united-kingdom#revenue

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Investec, evolution of SMEs in the materials handling sector - Leasing Life