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Manufacturing hampered by credit constraints

Half of British manufacturers felt credit conditions had become tighter over December and January, even though interest rates fell sharply in those month.

The Engineering Employers’ Federation (EEF) said half of the companies it polled reported availability of new credit had fallen, compared with 39 percent who said the same in a survey conducted in November.

As well as finance becoming unavailable for manufacturers, 37% of firms reported an increase in the cost of finance in the past two months.

Tony Sarginson of EEF in the North East, said: “Despite interest rates falling to a historically low level and the efforts to free credit markets so far, many manufacturers have yet to feel the benefit.

“Addressing the problems in the banking system remains a priority but some schemes to support lending to companies have yet to come on stream. Time is now of the essence for government and the Bank to put these in place and communicate clearly what is available to companies.”

In addition, the survey also showed that companies are facing increasing problems obtaining credit insurance. Around two-thirds of companies had seen credit insurance reduced or withdrawn, confirming growing reports that insurers are pulling out of the market.

Tony Sarginson said: “The speed of withdrawal of credit insurance is continuing to weigh on manufacturers and their supply chains. Action from government to slow the withdrawal of credit insurance is becoming increasingly urgent.”

A similar survey for the whole of the British economy published by the CBI this week also showed firms struggling to raise finance, albeit with a slight improvement in credit availability between January and February.

This was posted in Bdaily's Members' News section by Ruth Mitchell .