Availability of new loans to factories shows modest signs of improvement
THE AVAILABILITY of credit to British manufacturers has picked up modestly at the start of this year, according to industry group EEF.
A balance of three per cent of factories reported that the availability of new lines of borrowing has improved in 2012, the group said today.
Yet the EEF maintains that lending still needs to improve, pointing to continuing decline in the availability of finance from existing sources. This measure declined to a negative balance of minus nine per cent in the first two months of the year – worse than the minus five per cent recorded in the final quarter of 2011.
“We have to view an improvement in credit conditions as positive,” said EEF economist Lee Hopley, “but the absence of a trend showing that availability is increasing and costs are coming down on a consistent quarter on quarter basis indicates that there is more work to be done.”
The group is urging the government to push through the National Loan Guarantee Scheme, intended to direct £20bn of lending from the banks towards small businesses – guaranteed by the state.
Companies with turnover of less than £50m will be able to apply for loans, under the scheme.
“This must have an impact on the cost of borrowing which translates into a greater appetite amongst firms to approach banks for finance,” Hopley said.
“The growth in business investment that our economy needs is contingent on manufacturers having the confidence to commit to their capital expenditure plans and being able to access finance at the right price.”