Green shoots for lending to small firms

Julian Harris
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LENDING to small manufacturing businesses has picked up in the second quarter of the year, a leading industry body announced today.

Just as many small companies reported a rise in the availability of loans over the past two months, as those that reported a fall.

The result marked a strong upturn in credit supply to small factories.

In the first quarter of the year, the survey conducted by EEF revealed a negative balance of 11 per cent of respondents reporting a decline in finance.

“For the first time since the recession ended, manufacturers are reporting improving access to finance,” said EEF chief economist Lee Hopley.

A negative balance of seven per cent of medium sized manufacturers still reported decreased availability of credit, yet this was still an improvement on the negative balance of 11 per cent in the first quarter.

“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,” Hopley added.

A positive balance of 22 per cent of manufacturers reported an increase in the overall cost of credit in April and May.

And 28 per cent more companies said that the cost of new loans is increasing, compared to those who reported cheaper lending.

“Ensuring companies have access to the finance needed to invest and grow is critical for the recovery.” Hopley said.

Higher interest rates for the sector are mirrored by the cost of personal finance. Rates on personal loans have struck a 10-year high, the website Moneyfacts revealed last week.

A loan of £5,000 costs an average of 12.7 per cent, its research has found.