May 28, 2012 12:09 am

Cost of bank credit to manufacturers rises

The cost of bank credit to manufacturers is rising, even though its availability is improving, according to a survey of 250 companies by the Engineering Employers Federation.

The industry association said the increasing cost – driven by higher arrangement fees and other conditions apart from the interest rate – was a concern for manufacturers that were considering investment.

In its quarterly survey of credit conditions, a balance of 21 per cent of companies reported an increase in the overall cost of credit over the past two months, up from 16 per cent last time.

“Companies really need to see the cost coming down,” said Lee Hopley, the EEF’s chief economist. “They are looking at investing in what is becoming an increasingly uncertain environment and we need to give them all the reasons possible to take the plunge.”

She said it was too soon to assess the impact of the government’s £20bn national loan guarantee scheme, which aims to cut the average cost of borrowing by one percentage point but has been running only a few weeks.

But she said: “We want to see banks and the government pushing this to small and medium-sized companies and making sure they know what’s available.”

A stronger balance of companies, 4.3 per cent, reported improved availability of new lines of borrowing. A positive balance, 1 per cent, reported improved availability of credit on existing arrangements for the first time since the survey began in 2007.

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