Falling SME borrowing will hamper manufacturing investment

The monitor shows that small businesses have cut back on borrowing in the past quarter. The survey found that only 43% of 5,000 SMEs surveyed in the second quarter used external finance such as bank loans, down from 50% in the first three months of the year. More than one third of firms that would have liked a loan said they didn't bother to apply because they assumed their application would be rejected. Commenting on the findings, EEF chief economist Lee Hopley said the survey highlighted concerns that investment by manufacturers could be hampered by a growing reluctance from SMEs to access external finance to support investment. "UK banks need to be doing all they can to encourage creditworthy firms back through their doors," she added. "They can start by delivering on their commitments, such as consistently offering the declined loans appeals process and signposting service. So far, awareness of these initiatives by relevant SMEs is running woefully low." Last week, the EEF published results of its own quarterly Credit Conditions survey, which also revealed manufacturers are shunning banks in favour of financing investments by internal means.