Manufacturers are continuing to struggle from increasing costs of borrowing, despite low interest rates, and have benefitted little from quantitative easing measures, according to a survey released today.
EEF, the manufacturer’ organisation, says 45 per cent of firms reported a significant or moderate increase in the cost of finance in the past two months, up from just over 37 per cent in the first quarter. The proportion of firms reporting a reduction in the availability of new lines of borrowing fell from 49 per cent to 42 per cent but only 4 per cent of companies had seen an improvement. In addition more companies (39 per cent) reported an increase in the fees on existing borrowing – up from 34 per cent in the first quarter and 27 per cent at the end of last year.
“Despite interest rates falling to a historically low level and the efforts to free credit markets so far, manufacturers are seeing few benefits,” said Steve Radley, chief economist at EEF. “It is important that the Bank continues with its quantitative easing programme to prevent higher borrowing costs weakening the recovery we hope to see later in the year.”
Almost 70% of companies had seen access to credit insurance either withdrawn or reduced in the last two months, throwing even more importance on the success of government’s recently announced credit insurance top up scheme.
“Our survey shows that credit insurance is a major issue for many manufacturers,” added Radley. “The government will need to keep a very close eye on whether its top -up scheme is working and take action if the number of firms reporting problems does not go down.”