EEF: More businesses seeing cost of credit soar

Businesses in manufacturing sectors are seeing a rise in the cost of new finance from banks and other lending providers.


Businesses in manufacturing sectors are seeing a rise in the cost of new finance from banks and other lending providers.

Businesses in manufacturing sectors are seeing a rise in the cost of new finance from banks and other lending providers.

The balance of companies reporting an increase in the overall cost of credit in January and February this year soared to 32 per cent from 19 per cent in the fourth quarter of 2010, according to the survey published by EEF, the manufacturers’ organisation.

There had been a slight decline in the proportion of companies reporting an increase in the cost of credit last year but the survey of 300 businesses shows that this has reversed in recent months.

The proportion of small companies reporting that fees on existing borrowing were up jumped to 32 per cent in the last two months, from 17 per cent in the previous quarter, while none reported a decrease.

The organisation’s report is the first business credit survey to be published since the announcement about Project Merlin in February, which saw Britain’s four largest banks agree to lend more money to businesses in 2011.

Lee Hopley, chief economist at the EEF, comments, ‘Until we start to see measurable progress on both cost and availability of credit, access to finance will remain the weak link in the government’s strategy for growth.’

Over a quarter of manufacturers expect their demand for external finance to rise over the next 12 months.

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