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Manufacturers not benefiting from easing of credit conditions
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04/06/2009
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Britain's manufacturers are continuing to see the cost of borrowing rise and no improvement in access to finance despite interest rates falling to a historically low level and efforts to free up the liquidity in the banking system, according to a survey released today (4 June).The survey, from the manufacturers' organisation EEF, highlighted the importance of the Bank of England continuing with its quantitative easing programme to prevent higher borrowing costs from weakening a potential economic recovery.
According to the survey 45 % of firms reported a significant or moderate increase in the cost of finance in the past two months, up from just over 37% in the first quarter. Over the same period, the proportion of firms reporting a reduction in the availability of new lines of borrowing fell from 49% to 42% but only just over 4% of companies had seen an improvement. In addition more companies (39%) reported an increase in the fees on existing borrowing - up from 34% in the first quarter and 27% at the end of last year.
EEF chief economist Steve Radley said that despite interest rates falling to an historically low level and the efforts to free credit markets so far, manufacturers were seeing few benefits. "It is important that the Bank continues with its quantitative easing programme to prevent higher borrowing costs weakening the recovery we hope to see later in the year," he went on.
In addition, the survey also showed that companies continue to face problems obtaining credit insurance. Almost 70% had seen access to credit insurance either withdrawn or reduced in the last two months.
" The government will need to keep a very close eye on whether its top -up scheme is working and take action if the number of firms reporting problems does not go down," commented Radley.
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Author
Ken Hurst
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