By Dan Gowland, Sales Director at Anglo Scottish Finance
As revealed in a recent report, British manufacturing is now the European leader in smart tech adoption, but with smart tech integration coming at a high-cost entry point, more are turning to finance to ease the monetary burden of transition, with the hopes of boosting growth and productivity within the sector.
There’s been an increasing appetite for “Industry 4.0”: the name given to the digital transformation of manufacturing. This is particularly evident in the scale by which manufacturers’ borrowing has increased to offset the cost of adopting AI, smart tech and automation in the UK.
While the benefits are clear – reduced inefficiencies, less waste, increased customisation, predictive maintenance and more – there is a hesitancy when it comes to making the transition for smaller firms. This cautiousness is often down to capital, a lack of know-how when it comes to implementing smart tech in the areas best-suited to their sector and how to reap the greatest return from their investment.
Here’s what other manufacturers can learn from the leaders of the UK’s smart tech transition, with insights gained from helping countless manufacturers join the world of AI, automation and smart tech…
Applying for world-leading innovation grants
Whether it’s through a UK government grant, such as the Made Smarter Adoption Grant or Innovate UK Smart Grants, or UK-accessible European grants, including Horizon Europe and the EIC Accelerator, manufacturers can leverage grants for investment in smart tech or to offset R&D costs.
For the manufacturers we’ve worked with, securing a funding grant is often the catalyst that makes a large-scale smart tech transition ‘bankable.’ It’s essentially an equity buffer that lenders look for, making it significantly easier to secure supplementary commercial finance, asset finance and general business loans at more favourable rates to cover remaining costs.
Upskilling staff in AI and smart-tech
Once the transition is fully costed, attention then turns to transitioning staff to new responsibilities, facilities and the benefits of smart tech. As it stands, 51% of UK manufacturers have implemented AI in their factories; however, this pace isn’t matched in terms of upskilling workers to make the most of new smart technologies.
In the tech industry, recent reports reveal 52% of UK leaders admit facing an AI skills gap, as well as only 37% of firms offering AI training to staff.
To avoid the smart element of newly transitioned factories becoming an under-performing asset, the most successful manufacturers have costed for the time to train employees in specialised AI and smart tech skills. This training covers everything from learning how to interpret new predictive maintenance tools to analysing data.
As UK manufacturing is currently struggling with a skilled applicant shortage, with 48,000 live vacancies as of January 2026, successful manufacturers have accompanied their smart tech transition with internal training suitable for a factory ready for Industry 4.0.
Using asset, hire purchase and leasing finance to grow sustainably
Over the last couple of years, the goal for business-savvy manufacturers has been to achieve ‘fiscal elasticity’ – by which we mean the ability to scale production without becoming over-leveraged.
As of early 2026, the data shows that the manufacturing sector is continuing this strategy, which we can personally attest to with an influx of hire purchasing and leasing inquiries for manufacturing and renewables.
According to the Finance & Leasing Association, new asset finance lending to the manufacturing sector grew by 7% in the final months of 2025, with SME lending on track to reach record highs in 2026. This confirms what we already know: that forward-thinking manufacturers are moving away from the ‘buy and hold’ model so that they can scale with sophisticated, sustainable growth strategies.
From a broker’s perspective, the choice between Hire Purchase (HP) and Leasing is usually a question of capital efficiency and tax strategy.
Hire Purchase has remained the go-to for many UK manufacturers because it allows for eventual ownership. In 2025 alone, business finance leases and Hire Purchase products accounted for over £20.6 billion in new business lending.
This approach has been particularly effective for manufacturers who need new core machinery with smart-tech functionality that also has a long operational lifespan, allowing manufacturers to spread the VAT and total cost over several years, while still claiming capital allowances.
For expensive, foundational manufacturing changes to make the move to smart tech systems – such as AI servers and compatible plant machinery – leasing is often seen as the most sustainable route, seeing 19% and 5% growth in November 2025 respectively.
Successful British manufacturers have been using leasing to protect their businesses against obsolete smart tech investment, allowing for regular upgrades and ensuring the factory remains at the cutting edge without the risk of owning a depreciated asset that no longer meets Industry 4.0 standards.
Leveraging investment in AI solutions
While much of the early talk around Industry 4.0 focused on the hardware, the last couple of years have seen a decisive shift towards AI, which has been turbocharged since the government announced billions in AI investment to boost innovation and business last year.
For modern manufacturers, AI has become a primary driver of margin expansion. In fact, recent research from Tata Consultancy Services found that 75% of manufacturing leaders expect AI to be a top-three contributor to their operating margins by the end of 2026.
Britain’s smart tech trailblazers are using AI to maximise ROI quicker than traditional investment in their factories, such as on new machinery, vehicles or other infrastructure projects that can have long bedding-in periods.
In practice, this ROI is already being seen and believed by UK business leaders. 52% of UK business leaders report that AI delivers a Return on Investment faster than any other technology. Current data shows that the average UK business is already realising a 17% return on its AI spend, a figure that is forecast to nearly double to 32% by 2027.
In our experience, the manufacturers seeing the greatest gains are those moving beyond basic automation and into Agentic AI: systems that can autonomously manage supply chain disruptions or shop-floor exceptions without human intervention.
Make UK’s Executive Survey supports this, citing that manufacturers have rapidly adopted AI for predictive maintenance and further suggesting that the announcement of the UK’s industrial strategy in 2025 may have eased speculation, encouraging other manufacturers to follow suit. This year, 22% of manufacturers expect significant improvement in deploying new smart tech and AI technologies, with a further 47% expecting moderate improvement.
As UK manufacturers push further into Industry 4.0, the leaders are proving that smart tech success isn’t just about innovation – it’s about how that innovation is funded, deployed and supported.
With the right mix of grants, finance and skills investment, smart technology becomes a commercial advantage rather than a financial strain. The manufacturers getting this balance right today are the ones shaping a more productive, resilient and globally competitive UK manufacturing sector tomorrow.
Photo by Homa Appliances on Unsplash
