Borrowing still difficult for UK manufacturers, EEF says

Posted on 27 Feb 2012

Credit conditions for manufacturing companies have eased slightly at the beginning of this year compared with the end of 2011, but they remain an issue, a survey from manufacturers’ organisation EEF finds.

In the absence of consistent signs of an improving trend, EEF said more should be done to increase the availability and reduce the cost of finance available to business, especially smaller companies, urging government to ensure the National Loan Guarantee Scheme is pushed strongly through bank networks and communicated to the private sector.

The Q1 Credit Conditions Survey shows a small improvement in the availability of new lines of borrowing over the past two months, but little change in views on the overall cost of credit among manufacturers.

The balance of 3% of companies saying the availability of new lines of borrowing has improved is a turnaround from the 3% balance reporting a decline last quarter. But this is still down on Q3 figures.

The balance of responses on availability of existing credit facilities remains negative (-9%, compared with -5% in Q4 2011).

The increasing cost of new lines of borrowing has also eased, with a balance of 15% reporting an increase compared with 24% last quarter. However, the smallest companies are more likely to have seen an increase in cost over the period.

EEF chief economist, Ms Lee Hopley, said: “There are a number of initiatives in train from government and the banks with the National Loan Guarantee scheme set to be the next off the rank. This must have an impact on the cost of borrowing which translates into a greater appetite amongst firms to approach banks for finance.”

She added: “The growth in business investment that our economy needs is contingent on manufacturers having the confidence to commit to their capital expenditure plans and being able to access finance at the right price.”