Quantitative easing hasn’t eased credit flow

Industry reports say food manufacturers’ access to finance is still deteriorating, despite the extra £26bn that has been pumped into the economy...

Industry reports say food manufacturers’ access to finance is still deteriorating, despite the extra £26bn that has been pumped into the economy through quantitative easing.

In a survey conducted by the Forum of Private Business (FPB) in March, not one respondent said that bank support had improved. Almost a quarter (24%) reported increases in banking fees and, on average, interest rates on loans were 5.6% over the Bank of England’s base rate.

In addition, 81% of respondents said that they had seen no change in the terms and conditions of overdrafts, with interest rates 5.8% above the base rate.

“There is a real sense of confusion about the amount of money being lent by the banks and the nature of that lending,” said Matt Goodman, policy representative for the FPB. “Our members are reporting little change in their ability to borrow, which has been severely compromised as a result of the credit crunch.

“In addition, we are hearing about steep fees, excessive charges and additional security being demanded. Consequently, confidence in both the government and banks is eroding.”

Only 5% of businesses said the government was providing them with better support.

The FPB’s comments come as The Bank of England’s Monetary Policy Committee voted on Thursday to continue with its programme, announced on March 5, of asset purchases totalling £75bn financed by the issuance of central bank reserves. It said that, since its previous meeting last month, a total of just over £26bn of asset purchases had been made and that it would take a further two months to complete the programme.

The Food and Drink Federation said its members were still struggling to get access to credit. It was also still concerned about the number of manufacturers that were having their credit insurance coverage reduced or withdrawn despite the government’s measures to increase cash flow.

In response, the Department for Business Enterprise and Regulatory Reform confirmed last week that it was still working on a package of measures to help businesses that have been suffering from reduced or withdrawn credit insurance coverage. A spokeswoman said on Thursday: “We are working in partnership with the credit insurance industry to find a collaborative way to alleviate the pressure being felt on supply chains throughout the UK.”