Bank Lending Improving in the Manufacturing Sector

Bank lending to manufacturing firms improved in April and May for the first time since the end of the recession, manufacturing organisation the EEF has said.

The EEF survey of 500 small manufacturing firms found that the same number of businesses reported a rise in bank lending in April and May, as reported a fall. In comparison, in February and March more firms saw a drop in access to credit than an increase.

The findings come despite reports that UK banks are failing to deliver on their lending targets to small firms under the Project Merlin agreement (PDF). Recent figures from the Bank of England (BoE) highlighted that the top five UK banks loaned £16.8 billion to small firms in the first three months of 2011 ? despite a target of £19 billion per quarter under Project Merlin.

“For the first time since the recession ended, manufacturers are reporting improving access to finance.”

said EEF chief economist, Lee Hopley.

“Hopefully this will translate into better news on new lending in the coming months. But availability is only part of the story we also need to see costs come down.”

Commenting on the BoE figures, a spokesman for the Merlin banks said:

“These numbers demonstrate the determination of the Merlin banks to lend to viable businesses.”

“Demand in some sectors, particularly among SMEs [small and medium-sized enterprises], remains muted, but we are devoting considerable time, effort and resource, particularly through the Better Business Finance initiatives, to ensure that we help viable businesses to access finance.”

British Chambers of Commerce director general, David Frost said:

“There has been a crisis of confidence between businesses and banks created by years of over-centralised processes, opaque decision-making and a lack of good local relationship-managers available to businesses customers.”

“Missed targets to lend to small businesses are disappointing, but they are only a part of the story. Banks have to think about how they talk to business customers and be ready to make decisions at a local level about their financing needs. Encouraging businesses which may have been dissuaded by headlines around a lack of credit, to apply for finance is essential.”

For free business advice on bank lending see our article on Business Bank Loans and Overdrafts.

Business Bank Lending is Improving in the Manufacturing Sector

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