By Maximilian Clarke

Economic uncertainty has further undermined credit availability for the UK’s manufacturers, EEF the manufacturers’ organisation has said.

EEF’s latest Credit Conditions Survey for the fourth quarter comes as economic uncertainty is growing and represents a turnaround from previous quarters, where availability of finance in particular had improved and, increases in the cost of credit had begun to stabilise. Following several tough years, particularly for small companies, securing finance on the right terms a further deterioration in the lending environment will act as another barrier to increasing investment.

“In the past few quarters we had finally seen some progress in increasing the supply of finance to manufacturers, but there are worrying signs that this has gone into reverse,” said EEF’s chief economist, Ms Lee Hopley. “Economic headwinds have picked up and there are growing signs of caution around short-term growth prospects. This is precisely the time where we need to see more, not less, investment if we are to create the investment and jobs our economy urgently needs.”

In response, EEF is urging the Chancellor to announce measures in the Autumn Statement to address short term funding issues as a matter of urgency. This should include clarification of how credit easing will be used to improve access to finance particularly by bringing down the cost of credit.

“Companies will be looking to the Autumn Statement to take forward the government’s commitment to get on top of short term lending challenges with a comprehensive package of measures to address supply constraints, especially for small firms,” continued Hopley. “This should include clarification of how credit easing will bring down the cost of finance for small companies.”

Also alternative sources of finance outside of banks should be boosted and spread across debt and equity. For example the government’s Enterprise Investment Scheme should be expanded to cover debt as well as equity investments.

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