7 June 2010

Manufacturers marking time as spending cuts take shape

Britain’s manufacturers are putting investment plans on hold to see how the coalition government’s deficit strategy unfolds, according to their Black Country-based trade association. The Confederation of British Metalforming says the mood among its members remains largely positive, underlining the more bullish feedback noted since the start of 2010.

Its director-general, John Houseman, was particularly pleased to see research,from the Engineering & Machinery Alliance, recording seven successive months when a majority of companies received higher levels of interest, from both domestic and export markets.

“It’s always good to see positive balances in the data, and for April, we saw plus signs for employment prospects, inquiries and orders,” he said.  “Almost three-quarters of companies reported that their workforces were unchanged since the previous monthly survey, so once again, it does seem as if the long period when redundancies were announced almost daily, is finally over.”

However, Houseman says there has been no improvement on the core issue which has bedevilled manufacturers for three years - access to finance.  ”Month after month, and especially since the turn of the year, we are seeing many companies wanting to proceed with projects, but who can not get money from the banks to allow them to do so,” he said.

“Some firms are eager to go ahead with capital investment programmes, others need finance to enhance the skills of their employees, and some wish to do both, but the banks remain very reluctant to lend to manufacturers, regardless of their sector.

“We heard a great deal of noise from the last government, about how they would lean on the banks to increase lending to industry, but unfortunately nothing happened. Hopefully the new coalition has a greater desire to see our manufacturing base recover.”

Although the research was carried out before the coalition unveiled its £6.2 billion spending cuts, Houseman believes companies were also loath to proceed with investment plans - whether financed internally or externally - before the target areas were identified.

“I think it was inevitable, given the talk about looming cutbacks in the public sector, that firms didn’t want to embark on projects against such an uncertain backdrop, particularly given the continued volatility in the equity and bond markets,” he said.

“Hopefully, now the information is out there, we will see in May and June that those companies able to finance investments will proceed, and that others are finally able to access bank debt more readily.”

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