Manufacturers see borrowing levels improve
ACCESS to credit has improved in the last two months, according to research out today from manufacturers’ organisation EEF.
However, borrowing costs are rising despite the government’s efforts. Its National Loan Guarantee Scheme, launched at the end of the first quarter, was supposed to reduce costs but does not yet appear to have had an impact.
The group’s quarterly survey reveals a net balance of 4.3 per cent of firms experienced improved availability of new lines of borrowing over the past two months, with a balance of one per cent reporting improved availability on existing arrangements – the first time the index has been positive since they survey began in 2007.
However, the balance of companies reporting an increase in the cost of credit worsened in the quarter to 21.2 per cent, with 16.2 per cent reporting higher fees on existing borrowing.
“A greater improvement in the availability of credit after tentative signs of improvement at the start of the year is welcome, especially on existing terms as changes in these are often a point of sore contention amongst SMEs,” said EEF economist Lee Hopley.
“Increasing costs however remain a frustration, particularly the proportion of companies reporting higher fees.
“This is arguably the part of the cost of finance that is least impacted by tight wholesale funding markets.”
The EEF also stressed that it is “still early days” for the government loan guarantee scheme and insisted “it is critical no momentum is lost in promoting this scheme to SMEs”.