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Bank loan shortage frustrates smaller manufacturers as output and orders fall Bank loan shortage frustrates smaller manufacturers as output and orders fall
(5 months later)
Britain's smaller manufacturers have suffered a drop in orders and output over the last three months and complained that lack of access to bank loans continued to curb their spending plans, according to a survey by the CBI business lobby group.Britain's smaller manufacturers have suffered a drop in orders and output over the last three months and complained that lack of access to bank loans continued to curb their spending plans, according to a survey by the CBI business lobby group.
Companies are cautiously optimistic, however, that demand will pick up in coming months, the CBI said, in the latest sign that the Bank of England may hold off from moves to stimulate the economy at its policy-setting meeting this week.Companies are cautiously optimistic, however, that demand will pick up in coming months, the CBI said, in the latest sign that the Bank of England may hold off from moves to stimulate the economy at its policy-setting meeting this week.
The CBI's survey of small and medium-sized manufacturers suggested a bigger than anticipated fall in new orders in the three months to April was driven by a drop in both domestic and export demand.The CBI's survey of small and medium-sized manufacturers suggested a bigger than anticipated fall in new orders in the three months to April was driven by a drop in both domestic and export demand.
Output also fell for the fourth consecutive quarter and companies said getting loans remained a challenge, with the proportion citing external finance as a likely constraint on capital spending at its highest level since October 2010.Output also fell for the fourth consecutive quarter and companies said getting loans remained a challenge, with the proportion citing external finance as a likely constraint on capital spending at its highest level since October 2010.
"It's been another disappointing quarter for small and medium-sized manufacturing firms, who have seen new orders and output continue to fall," said Stephen Gifford, CBI director of economics."It's been another disappointing quarter for small and medium-sized manufacturing firms, who have seen new orders and output continue to fall," said Stephen Gifford, CBI director of economics.
"Conditions will remain challenging for the sector. Fears about the impact of political and economic conditions abroad on export demand have risen and there is little sign in this survey that credit conditions are improving.""Conditions will remain challenging for the sector. Fears about the impact of political and economic conditions abroad on export demand have risen and there is little sign in this survey that credit conditions are improving."
Manufacturers have faced high energy and materials costs while struggling to raise the prices they charge to customers. Profit margins were squeezed in the last three months as growth in average unit costs was the fastest since October 2011, the CBI said. Manufacturers do not expect that to let up in the coming quarter, with domestic prices rising only slightly while cost inflation remains high.Manufacturers have faced high energy and materials costs while struggling to raise the prices they charge to customers. Profit margins were squeezed in the last three months as growth in average unit costs was the fastest since October 2011, the CBI said. Manufacturers do not expect that to let up in the coming quarter, with domestic prices rising only slightly while cost inflation remains high.
There were some bright spots in the survey of 348 companies, with optimism about export prospects up for the first time in a year. Manufacturers also expect output to grow slightly in the next three months and for there to be a "modest" increase in headcount.There were some bright spots in the survey of 348 companies, with optimism about export prospects up for the first time in a year. Manufacturers also expect output to grow slightly in the next three months and for there to be a "modest" increase in headcount.
Other business surveys have had a slightly more positive tone, in particular last week's closely watched Purchasing Managers' Index surveys, which showed stronger than expected growth in the dominant services sector.Other business surveys have had a slightly more positive tone, in particular last week's closely watched Purchasing Managers' Index surveys, which showed stronger than expected growth in the dominant services sector.
Those readings have reinforced expectations that the Bank's monetary policy committee (MPC) will not make any policy changes this week. Only three out of 63 economists polled by Reuters expect the BoE to announce on Thursday that it is extending its quantitative easing (QE) programme.Those readings have reinforced expectations that the Bank's monetary policy committee (MPC) will not make any policy changes this week. Only three out of 63 economists polled by Reuters expect the BoE to announce on Thursday that it is extending its quantitative easing (QE) programme.
Howard Archer, chief UK and European economist at IHS Global Insight, said: "The odds favour the Bank of England continuing to hold off from more stimulus on Thursday at the end of the May MPC meeting. However, it is by no means a nailed-on-certainty that the MPC will sit tight on Thursday, and it is far from inconceivable that they could go for a further £25bn of QE."Howard Archer, chief UK and European economist at IHS Global Insight, said: "The odds favour the Bank of England continuing to hold off from more stimulus on Thursday at the end of the May MPC meeting. However, it is by no means a nailed-on-certainty that the MPC will sit tight on Thursday, and it is far from inconceivable that they could go for a further £25bn of QE."
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