Small and medium-sized (SME) manufacturers in the UK and Ireland are left with almost £5bn (€5.5bn) in unsold stock, according to the Asset Based Finance Industry.

The ABFA found that unsold stock held by manufacturers rose to £4.94bn from £4.87bn in 2015, which it says places a strain on cash flow.

The body stated that the value of the inventory constituted 16% of the £81bn annual turnover of SME manufacturers, and had risen over the past five years despite some economic recovery.

The ABFA said that money is kept in unsold stock, preventing its use for business development or research and development.

Jeff Longhurst, chief executive of the ABFA said: “SMEs are finding it hard to reduce their inventory levels as customer demand remains subdued.”

The ABFA stated that this offered an opportunity for SMEs, as its members sought funding secured against the stock, an amount totalling £584m by the end of June, a 56% increase over five years.

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Longhurst added: “Asset based finance can be used as a form of security to unlock the value tied up in stock…[and] can complement an invoice finance facility as well, allowing a business to improve their cash flow.

“By allowing companies to access vital finance, it gives them the opportunity to invest in their business and means that growth doesn’t end up stalled by cash being tied up in unsold stock.”