The availability of finance is improving for UK manufacturers, an industry body claimed today.
EEF, the manufacturers’ organisation, said that its latest quarterly Credit Conditions Survey shows positive balances for all three availability measures for the first time in the survey’s history.
Nevertheless, the positive balances for both the availability of finance from parent companies and the availability of new lines of borrowing both fell back from the levels recorded in the previous quarter.
Moreover, the responses from smaller companies remained more negative across all indicators.
Lee Hopley, chief economist at EEF, noted that this quarter’s survey shows a welcome further reduction in the balance of firms reporting an increase in the overall cost of credit, as well as an improvement in the availability of credit. She stressed, however, that smaller firms are failing to see the same benefits as larger firms.
“These results suggest there is an immediate case for strengthening the Funding for Lending Scheme and making SMEs more aware of it. But in the long-run we ultimately need a much more diverse and dynamic finance landscape for SMEs. This means more competition between banks lending to SMEs and more options outside of banks,” Hopley added.
The EEF wants to see the government launching a focused three-month review of what more can be done to stimulate private competition in the area of SME banking.
Other findings from EEF’s survey of almost 200 companies show that the cost of borrowing remains a concern for manufacturers, with more companies still reporting an increase rather than a decrease in the overall cost of credit. However, there are positive signs as this balance has fallen to its lowest level since the start of EEF’s Credit Conditions Survey in the third quarter of 2007.
One of the reasons for a fall in the cost of credit may be the Funding for Lending Scheme, which was launched by the Bank of England and the Treasury in August last year with the aim of boosting lending to businesses and households. The scheme, which reduces the price at which banks and building societies are able to fund themselves, is thought to have had the most impact on the mortgage market.
The Council of Mortgage Lenders reported yesterday that house purchase lending reached its highest January total since 2008 at the start of this year and increased by 11% compared to January last year.