Today’s manufacturers, says the report, are overlooking investment from banks in favour of self-financing. This could potentially lead to lower levels of overall investment, and in turn growth in a manufacturing sector already rocked by Brexit, warned EEF.
Some positivity remains in the industry, with 85% of manufacturers said they felt confident of securing finance for a new business opportunity. However, almost two-thirds (65%) said they were more unlikely to use external financing than they were two years ago.
Over half of firms (53%) would postpone or cancel investment if they couldn’t fund it themselves. This is in spite of an improvement in overall economic conditions, and historically low interest rates. Another potential concern is that manufacturers’ propensity to hold cash on their balance sheet (55% say they are holding more now that pre-recession) will leave them vulnerable in the event of negative interest rates –something that several banks, including NatWest, have warned about.
Lee Hopley, chief economist at EEF, said: “Manufacturers’ reluctance to rely on external finance is a persistent hangover from the credit crunch, where trust and confidence in the banks stalled and never quite recovered. But with the Brexit vote dampening investment intentions and adding to uncertainty, this pre-existing condition could now become further aggravated, posing a risk for growth. “
