Finance news in brief

Posted on 7 Mar 2011 by The Manufacturer

The latest news making waves in the financial sector.

Limited company contractors still struggling with finance

According to the Manufacturing Institute, small firms are experiencing cash flow issues and the problem of acquiring credit “has not gone away”.

Ed Moss, spokesman for the organisation, said that business owners have learned to take ‘glossy statements’ made by banks ‘with a pinch of salt’.

“They are still having trouble finding finance; the banks are not yet lending,” he said.

“It’s the smaller guys that unfortunately suffer when it comes to producing the goods – they send them out, they’ve been delivered and then, of course, they’re chasing the money. So cash flow is still a problem; it has not gone away.” The expert’s comments come after European Commission announced the launch of an EU-wide Small Business Act which aims to improve smaller enterprises’ access to finance.

Potential for Project Merlin success questioned

Lawrence Galitz of ACF Consultants, a leading financial training company, says the Government has still given too much power to the banks to say ‘no’ to all but the safest loans.

Project Merlin aims to restrict bankers’ bonuses, encourage transparency on pay levels and compel banks to start lending again to kick-start the economy.

But Galitz says the Government initiative has handed the banks a get-out clause by allowing them to lend to only ‘viable’ and ‘high quality’ borrowers.

“Who or what is a ‘viable’ or ‘high-quality’ borrower is still entirely up to the banks to decide,” says Galitz, CEO at the financial training company. “Presumably ‘high-quality’ means those borrowers who don’t actually need the funds in the first place. Project Merlin will manifest itself in words rather than deeds.” Galitz says that many banks are hiding their reluctance to lend by reporting a downturn in demand for loans in recent months.

“Banks may claim demand is down but in many cases requests are being stifled before a formal application is made,” says Galitz. “If a business completes a formal application and is then turned down, it doesn’t look good on the bank’s statistics.

But if the bank informally tells a business ‘don’t even bother applying’, then it can blame the lack of demand on businesses rather than on their unwillingness to lend.”

Silverline receives £2m funding from GE Capital

Suffolk based Silverline Office Equipment has managed to secure £2m of funding from asset based lending specialist GE Capital to support the businesses’ restructuring plans.

With 120 employees at its UK base in Mildenhall, Suffolk, Silverline has been manufacturing steel office furniture for over 30 years in the UK.

Said Silverline chairman Stan Ensinger: “We are very happy to be working with GE Capital on this opportunity. Recognising the strengths within our business and the opportunities for the future, GE Capital was prepared to support us through a challenging period The team demonstrated an understanding of our business’ requirements, both immediate and future, and delivered exactly what they said they would at the outset in the timescale we required.”

Sterling hits 13 month high against dollar

The pound broke above the $1.63 mark early this month – a level not seen for more than a year – after economic data suggested the UK could raise rates before the US.

Currency traders were encouraged to buy the pound by property market data that showed a surprise climb for UK house prices, and a slightly stronger-than-expected reading for UK manufacturing activity.

That helped to push the pound to $1.633, its strongest since January 2010, and a gain of 2 cents over the previous 48 hours. The UK manufacturing Purchasing Managers’ Index slipped to 61.5 in February from 62.0 in January, but the reading was higher than forecasts of 61.0. Other data showed UK mortgage approvals picked up at the start of the year.

A glut of positive economic data has helped to maintain demand for the pound in recent weeks, as speculation grew that rate-setters at the Bank of England will raise rates to control inflation.

However, official GDP figures recently downgraded the contraction in economic growth to 0.6% from 0.5% in the fourth quarter of last year, clouding the picture on the UK economy.