Manufacturers say cost of lending still too high
THE relationship between banks and manufacturers is easing, but there are few signs of the flow of money from banks increasing, according to trade body the Engineering Employers’ Federation (EEF).
Its latest survey has indicated a slowdown in the increases in funding costs experienced in recent years, but shows that more firms are still reporting increases rather than decreases. It also said that the current (historically high) rates of interest and costs of bank loans are showing few signs of slowdown.
EEF North West Region Director, David Ost, 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.”
The EEF has urged the government to respond decisively to the forthcoming Independent Commission on Banking report by increasing competition in the SME market by following the commission’s call for a higher number of Lloyds branches to be sold than the 600 currently on the market, looking at the impediments SMEs face when switching banks, diversifying sources and types of capital available and by pushing for improved knowledge of the manufacturing sector.
Ost added: “A lack of competition in the SME lending market is still keeping costs too high and preventing the flow of finance our growing companies need.
“The government must respond strongly to the competition-enhancing recommendations in next month’s report on banking from the Vickers’ Commission.”
