Member Article

Bank lending to North East manufacturers- Project Merlin

Last week the Banks published their latest figures on lending to business whilst next month sees the Independent Banking Commission’s report on proposals to reform Banks. Manufacturers in the North East have come out of the recession leaner and actively looking for new markets, particularly in fast growing emerging economies.

Recognising the need to support these efforts to expand through investment and growth, government has been vocal on how to lift access to finance. Banks have been more active; setting up a Taskforce, agreeing to a new Lending Code and introducing a new Business Growth Fund.

But, despite this we need to look at whether this is sufficient and focussed on the right areas. Since the end of 2008, EEF’s quarterly survey has shown the cost of credit getting worse not better for manufacturers across the North East. Only in the last quarter did we see the availability of finance improve after ten quarters of decline. Reversing these trends will not be easy and business itself as a customer of the banking industry has a role to play. But there are some areas, where it is vital we see change. First of all, we need to see the availability of finance, on reasonable terms, improve, both within and outside the banking sector.

The cost of credit also needs to stabilise. In particular we need to see the cost of often inappropriate fees, terms, and conditions attached to credit start to come down. There must be a clear focus on improving the situation faced by smaller firms.

Banks also need to understand their customers better. We are encouraged by some institutions reaching out to learn more about manufacturing. But we need the learning flowing through into lending and investment decisions.

Finally we need to see improvements in service with transparency on new management fees, how banks are enforcing loan covenants and also tightening the application of terms and conditions. With growth faltering, we must capitalise on all our strengths. The government can help and so can the Banks. We must ensure our world-class financial sector supports North East manufacturing companies and help grow our world-class manufacturing base.

This was posted in Bdaily's Members' News section by Tony Sarginson .