EEF agrees with the Committee’s view that the scheme is now working well but believes the problem remains the terms and conditions being imposed by the Banks and the increasing levels of security being required. As a result, EEF believes this is preventing many viable businesses from obtaining finance through the scheme.
Furthermore, some companies have experienced the withdrawal of current facilities such as overdrafts and invoice discounting after applying to the Banks for assistance. This is inevitably deterring other firms from coming forward.
Commenting, EEF Director of Policy, Steve Radley, said:
“Now it is bedding down this scheme has the potential to provide a lifeline to many viable businesses through the bottom of the cycle and provide cost effective finance for crucial investments many of them need to make.
“However, the Banks have to play their part in ensuring its success. There are still too many examples where tighter terms and conditions are being imposed which is turning many manufacturers away from using the scheme. If we fail to unlock this blockage companies’ efforts to prepare for the upturn will continue to be hampered.”
According to EEF’s data, despite the introduction of such schemes and record low interest rates, the cost of finance has continued to increase whilst availability has tightened.
Figures published in last month (1) showed 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 of 2009. 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.
ENDS
Notes to Editors
1. The data was taken from EEF’s second quarter business trends survey of almost 700 companies.
2. For up to the minute views on manufacturing and the economy visit EEF’s blog site www.eef.org.uk/blog
3. EEF, the manufacturers’ organisation is the representative voice of manufacturing in the UK together with ECIA, the Engineering Construction Industry Association and UK Steel. The EEF has a growing membership of almost 6,000 companies of all sizes, employing some 900,000 people from every sector of engineering, manufacturing, engineering construction and technology-based industries.