Jobs outlook brighter for UK manufacturing businesses as cost of accessing credit falls, EEF survey suggests

The outlook for UK manufacturers seems to be improving thanks to the success of credit easing schemes, a survey suggests.

The number of companies faced with rising funding costs has fallen to 11.2% from 21.2% in the previous quarter - the lowest figure since 2007 - meaning that better lending conditions could encourage more jobs to be created as confidence in the market grows.

EEF, the manufacturers' organisation, said the recently launched Funding for Lending scheme, which aims to lower the cost of credit for small and medium-sized businesses, may be the reason why some employers are seeing costs fall.

Lee Hopley, the EEF's chief economist, said: "It is a welcome sign that the stubbornly high number of companies seeing the overall cost of finance increase has fallen to the lowest level since the financial crisis.

"However, there are still more companies saying the cost of finance is going up rather than down. With the short-term demand outlook looking very challenging, we simply cannot afford to have factors that are at least partly in the UK's control holding back desperately needed investment."

Some firms, particularly smaller companies, are opting out of accessing external funding altogether, with half now saying they do not need to borrow, a rise from 40% and the equal highest figure recorded over the five-year history of the survey.

A slightly higher percentage of small businesses said they were in the position of not needing to borrow.

EEF said the figures were supported by numerous anecdotes of firms holding on to cash to support their own working capital and investment plans.

Ms Hopley called on the Government to challenge banks and other finance providers to show small firms what they are prepared to offer under the Funding for Lending scheme as she warned that some companies are still reporting that the cost of credit is rising rather than falling.

She added: "We need our credit-worthy firms to bring forward each and every investment that they are contemplating to help support growth."

The EEF said 218 companies took part in the survey, which was conducted between August 1 and August 22.

Copyright Press Association 2012