Credit: Availability up, but cost up too UPDATE

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EEF has been reporting on credit conditions across manufacturing since the end of 2007 and for most of that period the bad news outweighed the good.

2013 has seen the tide slowly turn and the year has ended with more companies looking to access external finance and a higher balance of companies reporting that it is more readily available. But we've not yet reached the point where we can safely say that access to finance challenges are behind us as costs are also on the up.


  • The overall cost of credit increased for a balance of 11% of companies in the past two months, the highest balance since the end of 2012.
  • The balance of responses on the cost of new finance picked up to 10% following the historic lows seen last time (2%).
  • Availability of finance was positive on all three indicators, with a balance of 11% reporting increased availability of new credit lines (see chart). This is the second quarter running this balance was positive.
  • Dropping from last quarter's highs of 52%, the proportion of companies citing no need to borrowing fell to 40% - the lowest in our survey.
  • Small companies are also reporting improved access to finance, but they are also the group most likely to have seen costs increase.

% balance of companies reporting change in availability of finance

More borrowing, more investment?

Perhaps this tells us that while Funding for Lending isn't yet knocking it out of the park, it is helping to clear some blockages - including for small companies.

This is pretty timely. Last month our Business Trends Survey, reported that investment intentions had hit a six-year high. SMEs were also playing a big role in increasing investment plans. With the UK's economic recovery is so dependent on business investment growth materialising the focus by banks and policy makers on ensuring that credit availability continues to improve AND that costs come down is imperative.

Net lending down, applications down, but more Funding for Lending

It's been a week for news on lending. In addition to our survey we had the SME Finance Monitor and Credit stats from the Bank of England. A couple of points to note:

Net lending to SMEs dropp £200m in October (down from a fall of £550m in Sept) - Bank of England

Early data for 2013q2 shows over 90% success for finance renewals compared with just success on new applications for under half of companies - SME Finance Monitor

So... was it in response to these figures that the Bank of England and the HM Treasury announced that Funding for Lending support for mortgages would end with all its firepower directed at SMEs. Not according to today's reporting of the FLS announcement. Nevertheless, the SME focus is a welcome move to get more finance at a lower cost to businesses looking to ramp up their investment plans. .


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