UK firms see tighter credit in coming months - CBI

LONDON, June 2 (Reuters) - British firms expect banks to tighten access to new credit less sharply over the next three months than in the three months to date, the Confederation of British Industry said on Tuesday.

The CBI's May Access to Finance survey showed that a net 7 percent of firms expect banks to offer tougher conditions for new lending, down sharply from the net 36 percent expecting this the last time the survey was conducted in March.

"Credit availability is still a concern, but the severity of the situation is easing compared with a few months ago," said Ian McCafferty, the CBI's chief economic advisor.

Conditions for existing credit lines were expected to remain unchanged, the most positive result since the CBI started the survey in January.

The Bank of England has identified easier access to credit as essential for Britain to stage a solid recovery from what many economists forecast to be the sharpest downturn since the end of World War Two, and the government has repeatedly prodded banks to lend more.

But banks are still reining back access to credit, albeit at a slower pace than before. Over the three months to May, a net 10 percent of firms reported worsening credit conditions for existing credit, down from 16 percent in March, while for new credit a net 20 percent of firms reported tougher lending terms.

Overall, 27 percent of firms reported banks raising borrowing costs for new or renewed credit lines by 1 percentage point or more in the three months to May, down only slightly from 33 percent in the three months to March.

Just 10 percent of firms reported a reduction in borrowing costs, despite the fact that the BoE cut its main interest rate to a record low of 0.5 percent in March before embarking on a 125 billion pound scheme to buy up financial assets and ease credit conditions. (Reporting by David Milliken; Editing by Andy Bruce)