Kelly Green, North-East regional director at Lloyds Bank Commercial Banking, explores how businesses in the region’s offshore wind sector can prepare to capitalise on potentially lucrative growth opportunities.

THE North-East has some of the most beautiful coastline in the country and if you’ve ever enjoyed a stroll in Seaham, you’ll know it’s also blessed with a bracing wind. It’s a renewable energy resource that has fostered a flourishing industry.

Back in 2000, Blyth Offshore Windfarm was the first in the UK. Since then, offshore power has become key to the region’s economy. The North-East is now a global leader in the renewables sector, and has benefitted from our rich engineering heritage, with skills sharpened over generations in the shipbuilding industry and others.

It’s a growing opportunity too. The proportion of the UK’s electricity generated by offshore wind was just 0.8 per cent in 2010. That figure is expected to reach around ten per cent by 2020, and about one third by 2030.

To support that growth, March saw the launch of the Offshore Wind Sector Deal, a joint initiative between industry and the government that will invest £250m in the development of the sector’s supply chain.

With the Sector Deal in place, and increasing demand for clean energy, it’s clear that businesses in this sector face an unprecedented opportunity to grow.

Capitalising on it, however, could mean that firms have to make strategic investments, such as expanding premises and hiring new staff. To do so, they’ll need to ensure they have adequate resources to hand.

One way that businesses can access the cash they need to support their growth ambitions is by tightly managing their working capital – the amount of money they have tied-up in the day-to-day costs of doing business.

Fortunately, there are a range of specialist tools available to help them do just this.

At Lloyds Bank, we’ve committed up to £700m to support businesses across the North-East during 2019, including by using tools such as asset finance, asset-based lending and invoice finance to manage working capital.

For example, businesses with opportunities to grow may need to buy more equipment to increase capacity, produce new products or improve productivity. Here, asset finance could provide welcome support.

Asset finance tools – such as hire purchase and leasing – are often used by businesses who need to invest in ramping up production to fulfil an uplift in orders.

Hire purchase means a partner – often a bank – buys the required equipment on a business’s behalf. The firm then repays the balance over an agreed timeframe, usually the lifetime of the asset. Meanwhile, leasing enables firms to rent an asset without having to buy it.

The benefit of asset finance is that it allows businesses to protect their working capital by avoiding the need to make big upfront payments, helping firms have cash on hand to support ongoing growth and simultaneously pursue other opportunities.

For example, a turbine blade manufacturer may need to buy new equipment to increase its output rate. Using hire purchase to spread the cost of the machinery means it can buy the equipment and still have funds available to recruit new staff to further boost its productivity.

Periods of sector growth can also mean that firms see a rapid rise in orders. As a result, businesses, particularly manufacturers, may find themselves having to increase inventories and stock of raw materials, which is where a tool like asset-based lending can be employed to great effect.

Asset-based lending differs from asset finance in that it allows firms to unlock money tied-up in assets they already own, such as stock or machinery, by using these assets as security for lending. This, in turn, can increase the cash available to help them secure new contracts, recruit or invest.

Meanwhile, during times of growth, businesses may also find that their debtor book suddenly increases in value.

Money that is tied-up in outstanding invoices cannot be used to capitalise on growth opportunities. But firms can quickly release this cash by using a specialist tool like invoice finance, which can help them access up to 90 per cent of the value of an outstanding invoice, often within 24 hours of it being issued, further helping boost their financial flexibility.

Thorough preparation is key for local businesses in the offshore energy sector looking to capitalise on burgeoning opportunities, and financial tools like these can help them deploy resources as and when they need to.

The offshore wind sector is proving to be a real renaissance for North-East engineering, and has the potential to continue driving prosperity for many years to come.

Our region has the skills and the experience to thrive in this sector, and we will be by their side as they do, ensuring they’re equipped for whatever blows their way.