Reading Time | < 1 min 2nd April 2012

Lending improves for manufacturers

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Britain’s manufacturing firms are beginning to find it slightly easier to gain access to credit and finance.

The latest credit conditions survey from the EEF, the manufacturing employers’ group, revealed tentative signs in the second quarter of the year that bank lending to smaller firms is improving.

The survey took in some 500 manufacturing businesses.

Just as many small companies reported an increase in the availability of new lines of borrowing over the past two months as reported a decrease. This compares with a balance of -11 per cent in the previous quarter.

But the cost of finance seems to remain a problem. Although fewer firms, the EEF said, are experiencing rising rates on existing credit facilities, a balance of 22 per cent of companies reported an increase in the overall cost of finance in the past two months.

What’s more, when it comes to new lines of borrowing, a balance of 28 per cent of respondents said that the overall cost had gone up.

Lee Hopley, the EEF’s chief economist, commented: “For the first time since the recession ended, manufactures are reporting improving access to finance. Hopefully, this will translate into better news on new lending in the coming months. But availability is only part of the story and we also need to see costs coming down.

“Ensuring companies have access to the finance needed to invest and grow is critical for the recovery. We need to see a sustained improvement before concluding that the actions taken by banks and government are bearing fruit and that no further measures are required.”