Manufacturers shunning banks, says EEF

In EEF's quarterly Credit Conditions survey, the balance of manufacturers reporting an increase in the cost of credit has fallen from 21.2% in Q2 to 11.2% -- the lowest balance since the survey began five years ago. EEF chief economist Lee Hopley said: "It is a welcome sign that the stubbornly high number of companies seeing the overall cost of finance increase has fallen to the lowest level since the financial crisis. While it is still too early to draw definitive conclusions, the fact this has coincided with the latest round of credit easing via the Funding for Lending Scheme offers hope that some impact is being achieved." However, the survey found that some firms are turning away from external finance providers, with half of all sizes of firms now saying they have no need to borrow. This is the equal highest proportion reported since the survey began. Robin Johnson, partner and chair of the industrial engineering group at law firm Eversheds, commented: "Lean has been the name of the game for a while. Manufacturers have focused on improving their operations through efficiency in processes, people management and investing in technology. They have also taken advantage of low interest rates to manage treasury operations leanly and focused even more on cost of capital. Larger multinationals have introduced sophisticated cash pooling and SMEs have focussed on cash collection and credit terms. "As things start to improve, notwithstanding negative macroeconomic matters still overshadowing global business, those companies that are lean are ready to benefit from any upturn. As regards funding lines, anecdotally there still seems to be some reluctance from 'traditional' banks to lend and specifically asset-based lenders seem in short supply or are offering terms that are not easy to turn into funding opportunities."