Ahead of the Office for Budget Responsibility's updated economic forecasts, EEF, the manufacturers’ organisation has published it’s latest access to credit survey which shows the first appreciable improvement in the overall cost of credit in 12 months.
Over the past quarter, the proportion of companies reporting an increase in the fees and interest rates on both new and existing credit facilities has continued to trend downwards. However, the percentage of companies actually seeing costs fall remains unmoved.
Any signs of improvement are encouraging but, EEF stressed that there was no room for complacency in attempts to ensure companies could access the finance they needed to invest and grow. In recent weeks Banks, Government and Industry have moved towards a broader agreement on what needs to be done to address these challenges. This must now be taken forward with action.
In practice this means improving access to finance through greater competition between Banks, alternatives to equity finance and, a restructuring of government-backed schemes into a single access portal.
Commenting, EEF Chief Economist, Ms Lee Hopley, said:
“Any sign of improvement in access to finance is welcome and the survey suggests Industry may be past the worst of the problems. However, we are not out of the woods yet. Banks, Industry and government need to push ahead with efforts to bring down the cost of borrowing and get credit flowing more freely to those companies that need it.
“The window of opportunity to address this will not remain open indefinitely and failure to take action now risks weakening economic growth over the rest of this Parliament.”
- Almost 20% of companies saw a moderate or significant increase in the cost of credit. This compares to 30% in Q3 and 34% in Q2.
- Whilst the majority saw no change in the cost of credit only 2.3% saw a moderate or significant decrease.
- 8.3% of companies saw an increase in availability of new lines of borrowing, down from 13% in Q3. Almost 16% of companies saw availability decrease, broadly unchanged from the last quarter.
- The cost of new lines of borrowing increased for 30% of companies, down from 37% in Q3. Only 4% of companies saw a decrease
- For companies with existing credit facilities (including overdrafts) the fees were unchanged for 80% of companies, though only 0.6% saw a decrease.