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Underinvestment in equipment would see SMEs ‘lose out’

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Reporter 4 minute read

The CEO of an asset finance and leasing solutions provider has warned that small businesses are less keen to invest in equipment, which could see them “lose out” to competitors.

Alleasing CEO Daniel Blizzard made the comments after the company released its latest quarterly Equipment Demand Index, which interviewed around 500 businesses with turnovers between $5 million and $250 million per year.

The October report found that 26.6 per cent of all businesses plan to make asset acquisitions in the final quarter of 2017, down slightly from 28.8 per cent from the previous quarter.

Further, the report found that the percentage of businesses planning to increase assets moved from 25.6 per cent in the first quarter of the 2017 calendar year to 30.6 per cent in the second quarter of 2017.

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Over the same period, business spending on equipment, plant and machinery increased from $12.1 billion to $12.5 billion. Since then, asset acquisition intentions have trended down, which Alleasing suggested could mean that actual spend could “fall away” at the end of the year.

Although businesses are planning acquisitions, the report found that the number of businesses that said they are operating with assets that are “outdated” and are hindering productivity doubled from 11.6 per cent in January 2017 to 22.4 per cent currently. SME businesses were the biggest demographic with this issue, with 27.5 per cent reporting outdated assets.

Mr Blizzard said that the index results back up data from the Australian Bureau of Statistics showing a 10.5 per cent year-on-year fall in business capital spending over the 2016/17 financial year.

“When businesses underinvest in their equipment,” the CEO said, “they are often left with unproductive or less efficient technology.

“If this trend continues, Australian businesses will miss out on the full benefits of Industry 4.0. They will also lose out to their competitors, particularly as many businesses across the globe continue to update their technology at a rapid pace.”

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Underinvestment in equipment would see SMEs ‘lose out’
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