Bank lending to manufacturers ‘has slumped’

The IT finance provider Syscap, says that while Bank of England data shows that lending to private non-financial companies rose by £2.2bn in January from December, lending to manufacturers has not been as forthcoming. This, says Syscap, coincides with UK manufacturers' industrial output falling 1.2% in the last quarter of 2011. It believes that with bank support in short supply, manufacturers are increasingly turning to leasing to fund purchases. New funding arrangements were up 7% last year, up from £3.2bn in 2010 to £3.5bn in 2011. With profitability of UK manufacturing companies at its lowest level since 1997, Syscap says that the onus is very much on private organisations and lenders to support manufacturers. Philip White, chief executive at Syscap, said: "The government has called for a 'march of the makers', with economic growth spurred by manufacturing-led exports. However, without financing that is not going to happen. "Banks are under a lot of pressure to increase their capital reserves, which means they are reluctant to lend, so it is encouraging to see that manufacturers can still rely on the leasing providers to fill the void. "The biggest purchase costs for manufacturers are the new machine tools they need to expand. With asset-backed lending, like a lease, the machine tool can act as a strong security for the lender and frees up the manufacturer to produce innovative new products. "Businesses in the manufacturing sector have approached us saying they are looking at alternative funding arrangements because their banks are making it increasingly difficult to secure a loan."