LONDON, June 9 British manufacturers are
increasingly turning away from external funding to grow their
businesses, a survey found, despite tentative signs that the
cost of credit is easing.
Nearly 52 percent of companies polled by manufacturers'
organisation EEF for its quarterly Credit Conditions Survey said
they had no need to borrow to support their business, a record
Industry turning its back on sources of credit would be bad
news for the government and the Bank of England, which are
trying to get lending going with measures such as the Funding
for Lending scheme (FLS) that makes it cheaper for banks to lend
to small businesses.
Some improvement of such lending may be starting to emerge
in the second quarter, said EEF economist Andrew Johnson.
The survey, published on Sunday, found the balance of
companies who said the cost of credit was rising rather than
falling sank to 2 percent, the lowest since the survey began in
2007, although the improvement was largely concentrated among
"The counterpoint to this cautious optimism, however, is
that there is continued growth in the number of companies that
appear to no longer see external finance as an important funding
source to support their business," said Johnson.
"This is a result mirrored by other surveys and will surely
Johnson said that some manufacturers seemed to be relying on
internal funds to support investment because they found many of
the criteria that banks set for fresh borrowing unreasonable.
EEF called on the government to consider ways of doing more
to stimulate banking competition for smaller companies, such as
by making it easier for firms to switch banks or lowering the
set-up costs for new banks.
Figures earlier this week showed that banks were drawing
down funds from the FLS but cutting net lending as they run down
massive pre-credit crunch loans.
EEF, which represents over 6,000 British engineering,
manufacturing and technology firms of varying sizes, surveyed
210 companies between May 1 and May 22.