Newspaper article The Journal (Newcastle, England)

Manufacturers Shunning Traditional Lenders Route; MANUFACTURING

Newspaper article The Journal (Newcastle, England)

Manufacturers Shunning Traditional Lenders Route; MANUFACTURING

Article excerpt

Byline: COREENA FORD coreena.ford@ncjmedia.co.uk

GROWTH and investment are at risk because UK manufacturers remain disengaged from the banking sector and are reluctant to borrow, a key EEF report claims.

Almost 10 years on from the start of the credit crunch, the relationship between manufacturers and banks is still yet to recover, with only 35% more likely to use finance than they were two years ago.

That's one of the findings of the latest report from EEF, the manufacturers' organisation, which explores manufacturers' attitudes towards external finance.

The concern is that manufacturers are shunning the banks in favour of self-financing investment projects, potentially leading to lower levels of manufacturing investment overall.

The report warns that this presents a risk to growth that will likely be sharpened as the UK heads towards Brexit, and says the Competition and Markets Authority's final recommendations on the competition failures affecting retail banking services for SMEs, due out tomorrow, must "pack enough punch to stop the rot".

According to the report, 85% of manufacturers are confident of securing finance for a new business opportunity.

But, while just over a third say they are more likely to use external finance than they were two years ago, 65% disagree.

At the same time, there has been a spike in cash holding, with 55% saying they are now holding more cash on their balance sheets compared to pre-recession levels.

The data shows that, prior to the Brexit vote, manufacturers' investment intentions were solid, but still over half of firms (53%) would postpone or cancel investment if they couldn't fund it themselves.

This suggests attitudes towards bank lending have remained largely unchanged even though economic conditions had improved considerably and interest rates have been stuck at historic lows.

Liz Mayes, EEF director for the North East, said: "These findings echo what we hear in the North East. …

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