Navigating Investment in UK Manufacturing

As the UK government prepares to deliver the next budget, uncertainty is the prevailing mood, felt on factory floors and in management boardrooms alike. The reality is uncomfortable, especially as electricity costs are now 46% higher than the median paid by International Energy Agency member countries[1]. More than a mere statistic, this, combined with other market data, translates into a daily operational headache. The prospect of investing in energy-efficient upgrades, decarbonising operations, or simply replacing ageing process chillers and other temperature control equipment can feel daunting.

Recent market data shows just how acute today’s pressures are:

Cost Area	2023–24 Approx. Change	2024–25 Estimated	Source
Fuel / Energy	+10% to +15%	+10% to +20%	Energy UK
Staff / Labour	+6% to +12%	+5% to +10%	Make UK / BDO
Raw Materials	+5% to +10%	0% to +6%	UK Govt Commentary

Process Temperature Control Challenges

Process cooling and heating play a crucial role in all manufacturing, directly influencing overall operational efficiency, cycle times, and product quality. These systems are fundamental to all production applications, from food and beverage to plastics moulding, and cannot be overlooked or treated lightly.

High electricity costs mean that operating old, inefficient chillers and investigating purchase options for new equipment represents an ongoing operational risk, threatening both margins and uptime. Manufacturers facing higher bills, less predictable demand, and tight labour markets need solutions that offer immediate efficiency, reliability and long-term flexibility.

Increased electricity bills impact far more than just the bottom line. They directly shape decisions on modernising facilities, upgrading process cooling and heating systems, and considering the shift from gas to electric solutions for decarbonisation and sustainability.

Traditionally, investing in critical process cooling or heating equipment required substantial capital expenditure (CAPEX), tying up business resources in fixed assets. In today’s climate, that static approach is becoming increasingly untenable. Manufacturers regularly scale their operations up and down, and cooling and heating requirements shift accordingly. Long-term investments are harder to justify when market conditions can change overnight.

It’s true that, with electricity costs outpacing gas, the economics of electrification are challenging, leaving manufacturers caught between the need for efficiency, carbon reduction, and financial realism. Nevertheless, continued innovation in process cooling and heating systems has delivered designs offering significant performance and environmental benefits compared to systems that they are meant to replace. Unfortunately, CAPEX budgets are often paused or subjected to increased scrutiny.

CAPEX and its Constraints

Historically, manufacturers have turned to CAPEX purchases to keep their facilities competitive. While ownership has long delivered certainty, it is increasingly accompanied by new challenges.

Big-ticket purchases mean tying up precious capital at a time when businesses desire liquidity and agility. Procurement decisions are rarely straightforward, often involving everyone from owner-directors to engineering managers, and up to finance directors. The journey from quotation to approval is often steep. As budgets tighten, companies find it harder to secure approval for major purchases. The lengthy processes can drag on for months, resulting in delayed upgrades and greater exposure to breakdowns or inefficient legacy systems.

The Pain of Stalling

For many industrial players, it’s clear that they risk “money down the drain” by maintaining old equipment and stalling the investment in new systems. One standout example from the field highlights the risk of the “repair trap.” A customer spent £7,000 repairing a chiller over several months yet continued to delay purchasing a new unit costing roughly five times more –  even after agreeing to split the cost between cash and other finance options. This indecision likely means more thousands lost on repairs, illustrating the waste resulting from organisations hesitating to invest in replacement assets.

This demonstrates a widespread industry challenge: tying up funds in repairs for old assets rather than investing in replacements. Awareness of available options, including flexible monthly payment models, could free companies from this cycle, enabling timely acquisition of new equipment without immobilising capital.

Breaking Free with Flexible Finance

In this environment, manufacturers should begin re-evaluating how they acquire and operate essential equipment. The shift towards operating expenditure (OPEX) has never looked more attractive, or more necessary.

Flexible finance solutions don’t just ease cash flow; they also save businesses from pouring money into ageing, inefficient equipment. By embracing OPEX models, companies can invest in upgrades faster, boost sustainability, and avoid costly downtime and repairs – keeping operations running smoothly. These tools aren’t just for the few; flexible finance and ownership alternative schemes are supporting a wide range of stakeholders with tailored, accessible options:

• Long-Term Hire:
  Manufacturers can rent equipment for extended periods, keeping costs off balance sheets. Hire agreements, in most cases, include maintenance and repairs. This approach reduces the burden on businesses and allowing them to allocate financial resources to other critical areas.

• Flex & Subscription Models:
  These offer seasonal or variable arrangements, making it easier to access new, even bespoke, technology, or scale capacity without capital outlay. Membership-style agreements facilitate equipment upgrades, exchanges, and tailored support. Not only do they take into account fluctuations in manufacturing needs due to seasonal variations, market demands, or unexpected events, but they also address the rapid pace of technological innovation. A membership or subscription-based agreement provides access to the latest temperature control technology, maintenance, and equipment exchange or upgrades, all with the flexibility of an operating expense.
  

• Asset Finance:
  Not every business will see long-term hire or Flex as the ideal solution. Some manufacturers, particularly those with stable, long-term requirements, may prefer to invest in essential equipment while still maintaining healthy cash flow. Two widely used forms of asset finance are Hire Purchase Agreements and Finance Lease Facilities, each offering different advantages depending on operational and financial priorities.
  
  Under a Hire Purchase agreement, the business spreads the cost of equipment through fixed monthly instalments, with full ownership transferring once all payments have been completed. This structure is often preferred for Assets which will be employed by a Business over a long period of time.
  
  A Finance Lease, by contrast, allows a business to access and use critical equipment while the finance provider retains legal ownership. Lease payments are made over an agreed term, and at the end of the period the business typically has the option of returning the assets, extending the lease, or upgrading the Assets for new equipment.

Sustainability and Future-Proofing

Flexible finance OPEX subscription models support sustainability and decarbonisation goals: companies can adopt the latest energy-efficient systems quickly, without being stalled by CAPEX restrictions or slow asset cycles. With maintenance and upgrades embedded, manufacturers can stay ahead both technologically and environmentally, as the regulatory and business landscape evolves.

The Real-World ROI:

Sustainability Benefits: Newer systems mean better energy efficiency, lower carbon impact, and progress toward net zero goals.

Immediate Cash Protection: Monthly subscriptions keep expenditure off the balance sheet, freeing cash for other critical needs.

Downtime Risk Reduction: All-inclusive support and maintenance minimise production delays and avoid costly emergency repairs.

Always Up to Date: Upgrade and replace equipment easily as technology advances, without re-investment or disruption.

A Competitive Advantage in an Unpredictable Market

Predictable cooling performance and cost of ownership are no longer “nice to have,” they are essential operational strategies. In a climate where every degree of precision and every hour of uptime matter, manufacturers must break free from the repair trap and rigid finance options.

With flexible subscription options, uncertainty doesn’t have to control production. It is about paying for what you use, when you need it, with options that adapt as the market changes.

Manufacturers recognise the value in membership-style, long-term rental agreements, not simply for financial reasons, but for the confidence, strategy, and competitive edge they deliver. Today, and probably in the years to come, flexibility is about more than cost, it is central to survival, sustainability, and success.

What’s Right for Your Business?

The UK’s manufacturing market is diverse, and there is no one-size-fits-all solution. Some businesses value security of ownership (CAPEX) and are comfortable with longer asset lifecycles. Others see clear advantages in the flexibility, risk reduction, and innovation that OPEX options provide.

What should manufacturers consider when thinking of the road ahead?

• Assess Total Cost of Ownership: Factor in energy costs, maintenance, downtime, and technology change when calculating ROI, not just the purchase price.
• Review Internal Approval Processes: OPEX models often expedite internal buy-in and speed up deployment, a crucial advantage when market conditions change rapidly.
• Plan for Decarbonisation: When electricity-based solutions offer a path to compliance and long-term resilience, explore OPEX options to pilot, deploy, and scale these technologies in manageable phases.
• Monitor Policy and Market Signals: Advocate for policy interventions to rebalance energy prices and support UK investment.

In the current climate, OPEX models, whether through long-term hire, Flex subscription arrangements, or asset finance, can provide manufacturers with the flexibility, cost predictability, and operational resilience they require. These solutions offer a way to remain competitive, future-proof operations, and focus on productivity rather than navigating the challenges of capital approvals and asset management.  For many, choosing the right path for many will be the foundation of future productivity, agility, and growth.

To support flexible investment, ICS Cool Energy partners with Reality Finance, a specialist asset finance provider with access to a broad panel of lenders. This partnership ensures that tailored funding solutions can be matched to a wide range of temperature-control and energy-efficiency projects, helping organisations invest in high-value systems without pressure on capital budgets.

Still have questions about business asset finance? Further information can be found in their helpful guide on Business Asset Finance. 

[1] https://www.energy-uk.org.uk/publications/reducing-non-domestic-electricity-policy-costs-to-drive-economic-growth/?utm_source=chatgpt.com#_ftn7