EEF survey shows signs of lending improvement

Posted on 10 Dec 2012

There has been an improvement in credit conditions for UK manufacturers through the second half of 2012, according to a survey by manufacturers’ organisation EEF.

The balance of companies reporting increased availability of new lines of borrowing moved back into positive territory over the past two months from -1%, to +4%.

New lending availability was also positive for a balance of the smallest companies in the sample (less than 100 employees).

In addition, the balance of companies reporting increased costs of new borrowing also edged down, though remained positive at +5%. The overall cost of credit was, however, still rising for a balance of companies as a result of the cost of credit on existing arrangements and fees.

A new question in the survey showed that demand for external finance is set to increase for a balance of companies in the next year. Over a fifth expect their financing needs to grow to support investment plans whilst less than 5% expect their demand to reduce relative to 2012.

However, the percentage of the smallest firms with no plans to borrow next year, at 43%, stands notably higher than for mid-size and large companies.

Lee Hopley, chief economist at EEF, said: “With companies, on balance, expecting their demand for external finance to increase next year, progress on the flow of credit and getting the cost down has to be sustained and built upon going forward. The new Business Bank must start to provide a long term solution to the underlying problem of a lack of competition in SME banking.”


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