With the continuing downturn, investment has been delayed, and many manufacturers are now in the sixth year of a four-year replacement cycle for their machinery.
Many larger manufacturers are hoarding cash, and SMEs may not know how best to get finance.
Large and small alike are making do with the kit they have.
This matters: obsolescence beckons ever faster for modern kit. As equipment
becomes more out-of-date and technology
moves on, firms become more unproductive and cannot innovate at anywhere near the level needed. If this continues, we run the real risk of a permanent loss of competitiveness.
This is no remote risk. We're seeing the impact now.
Research released by Lombard today shows that 40pc of firms have had to turn down new orders for want of the new equipment they need. This is costing UK plc £2.3bn a year. So anaemic are current levels of machine tool investment, the UK now lags behind not only the likes of Turkey and Mexico, but Switzerland and Austria.
This is not a league we're used to playing in, let alone losing. Nor is it just new business we're missing out on. Out-dated machinery costs firms too. Maintenance bills balloon and efficiency suffers. Making do will no longer do.
Why this lack of investment? One reason is that many businesses see capital expenditure (capex) as a major cash commitment. Our findings show that of the firms investing today, almost half use cash.
Many firms considering investment don't want to use up precious cash. They may balk at the risk of later cash flow problems, or they're earmarking cash for other uses such as R&D.
But many are simply opting to preserve their working capital, and sit out a period of turbulence and uncertainty. Yet there is a better way. Capex needn't consume cash.
This is where asset finance comes in, as a smarter way to fund assets. The likes of hire purchase, asset-secured debt and leasing provide an additional, flexible and committed line of funding. They're tailored specifically to a business's needs, and to an asset's earning power.
Asset finance can reduce the cost and risk of owning kit, and it can power growth. Businesses are waking up to asset finance, or rediscovering it: asset finance now accounts for a quarter of business investment, up from a fifth two years ago, and is still rising.
This is possible because there are funders with appetite to lend. Lombard alone lent over £4bn last year to British business, 15pc more than the previous year, and increased its lending to manufacturers by 25pc. We want to lend still more this year and our owners, the Royal Bank of Scotland, stand behind that ambition.
But an alarming 72pc of businesses we asked still did not know how asset finance works. Not good enough. And, as the UK's leading asset financier, we in Lombard must shoulder responsibility for changing that.
Of course, we all have a part to play in de-rusting Britain. We asset financiers must trumpet the benefits we offer business, and deliver on our open-for-business rhetoric. Manufacturers must acknowledge they can no longer make do with ageing kit.
Government too has its role to play in encouraging investment.
One of our customers used to run a business in Germany. There, at the end of the year, she had a choice of paying her taxes or investing in equipment. Now, in the UK, she must pay her taxes, and then find money for investment.
The UK's capital allowances regime needs to be more competitive. The EEF has called for 100pc allowances, as a revenue-neutral boost to investment. That customer would agree.
Many parts to play, then. And we must play them now. Because not only the UK's recovery depends on it, but our very standing as a serious industrial power.
Alexander Baldock is managing director of Lombard, Royal Bank of Scotland's asset finance division