Government loan guarantees and historically low levels of interest rates have failed to turn the tide of tightening lending to manufacturers in the UK, according to a survey by EEF, the manufacturers’ organisation.
Thirty-seven per cent of firms reported an increase in the cost of finance in the past two months. In addition, companies reported that the availability of finance has continued to dry up; almost half of companies saw a decrease in the availability of new lines of borrowing, up from 39% in the previous quarter.
Steve Radley, chief economist at EEF said: “Addressing the problems in the banking system remains a priority but some schemes to support lending to companies have yet to come on stream. Time is now of the essence for government and the Bank to put these in place and communicate clearly what is available to companies.”
Two-thirds of companies said they have also seen credit insurance reduced or withdrawn and Radley added: “The speed of withdrawal of credit insurance is continuing to weigh on manufacturers and their supply chains. Action from government to slow the withdrawal of credit insurance is becoming increasingly urgent.”
Analysts expect the Bank of England to drop interest rates further still today. Another half per cent drop to 0.5% is thought to be the most likely course.