Mixed picture on lending to manufacturers

1 min read

British banks are still increasing the cost of borrowing by manufacturers although the availability of funds is slowly improving according to a new survey.

Publishing its survey on the back of a call for greater competition ahead of the forthcoming Banking Commission report, the manufacturers' organisation EEF said lending conditions had begun to stabilise for Britain's manufacturers, but the overall picture remained mixed with few signs that the flow of lending to business had eased significantly. Commenting on the survey results, EEF's chief economist Lee Hopley (pictured) said: "The improvement in availability last quarter has now been accompanied by some easing in the numbers of firms facing a rise in the cost of finance. While conditions are slowly heading in the right direction the overall picture remains far from being as supportive as we'd like. There is clearly more finance available but the fact more companies are still reporting an increase in cost rather than a decrease suggests that firms are paying a price for it. "With global clouds of uncertainty providing enough reasons for firms to hold off investment this is the time we can least afford to add any further constraints through tight conditions on accessing finance. A lack of competition in the SME lending market was still keeping costs too high and preventing the flow of finance that growing companies need, Hopley added. The government must respond strongly to the competition-enhancing recommendations in next month's report on banking from the Vickers' Commission.