The Confederation of British Industry (CBI) says the way out of recession will be: ‘long and slow’, and that improved banking conditions are being offset by higher pricing for risk, in response to its latest figures from the manufacturing industry published today.
CBI Chief Economic Adviser Ian McCafferty said: “These figures reinforce our view that the road out of recession will be long and slow.”
He said companies were not reaping the benefits of the low value of Sterling, and those in the manufacturing sector were not reducing their levels of stock as quickly as hoped.
However, he said bank lending conditions were improving, but the conditions attached to the lending were harsh, and any savings made through reduced lending rates were offset by very cautious pricing for risk.
According to the CBI’s figures, the business confidence was rated at -16%, the least negative figure since October 2007.
Those companies citing credit or finance as a constraint on output eased back to 5% from a record high of 26% in April.
“While the figures on credit constraints appear encouraging, they should not be taken as a sign that bank lending is flowing freely again. Larger sized firms have been able to tap into alternative sources of external finance, through share and bond issuance. For smaller firms however, who do not have as wider range of funding options, credit constraints have not eased,” sais McCafferty.