Britain's banks are likely to face fresh criticism today as the biggest manufacturing organisation in the country accuses them of glacially slow progress in improving the provision of credit to businesses.
The Engineering Employers Federation (EEF) will say that while there have been some minor improvements in its members' access to credit over the past quarter, the job remains "half done" and that time may be running out to address the problem. The EEF's data shows that the number of firms seeing an increase in the cost of credit over the past three months fell from 30 to 20 per cent, but that only 2 per cent saw borrowing costs fall.
It also reveals that only 8 per cent of companies saw availability of borrowing improve – a decline of 13 per cent on the previous quarter's figure – while 16 per cent of companies complained that access to credit had worsened. For companies with existing credit facilities, including overdrafts, fees are still not coming down – 80 per cent said their costs had stayed the same over the past three months, with less than 1 per cent seeing borrowing expenses fall.
At best, the data suggests a marginal thawing of the credit freeze that has blighted many businesses and stymied the economy over the past two years, and will do little to appease critics of the banking sector.
"Any sign of improvement in access to finance is welcome and the survey suggests industry may be past the worst of the problems – but we are not out of the woods yet," said Lee Hopley, EEF chief economist. "Banks, industry and government need to push ahead with efforts to bring down the cost of borrowing and get credit flowing more freely to companies that need it." Ms Hopley added: "The window of opportunity to address this will not remain open indefinitely and failure to take action now risks weakening economic growth over the rest of the Parliament."
Figures published by the British Bankers Association last week suggest that tight credit conditions continue to be a particular problem for small and medium enterprises. The BBA said banks lent £564m to SMEs in September, no change on 2009, though this was the first time in 2010 that there had not been a fall year on year.Reuse content