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Following news that UK banks missed their small business lending targets under the Government’s Project Merlin agreement, UK manufacturers have reported an increase in the availability of new areas of borrowing allowing them to benefit from increased lending from the banks for the first time since the recession.

A survey by the manufacturing industry body EEF, reported that UK manufacturers are finding it easier to gain access to loans from high street banks.

However, the availability of funding from the banks comes at a price to manufacturers. EEF warned that companies must be prepared for high costs of credit, with one-in-five businesses reporting an increase to the overall cost of credit in the past two months.

Lee Hopley, chief economist of the EEF, said: "For the first time since the recession ended, manufacturers are reporting improving access to finance.

"Hopefully, this will translate into better news on new lending in coming months. But availability of is only part of the story and we also need to see costs coming down.

"Ensuring companies have access to the finance needed to invest and grow is critical for the recovery. We need to see a sustained improvement before concluding that the actions taken by banks and Government are bearing fruit and that no further measures are required."

The positive news for lending comes as the British Chambers of Commerce (BCC) downgrades their forecasts for economic growth. The BCC cut its forecasts for growth for 2011 from 1.4 per cent to 1.3 per cent, and have also reduced the figures for 2012 from 2.3 per cent to 2.2 per cent.

The BCC has also raised its predictions for inflation rates for 2011, from 4.2 per cent to 4.5 per cent.

News of an increase to the availability of lending for manufacturers will hopefully encourage SMEs to apply for the much-needed funding from the banks, which will in turn encourage economic growth.

For more information, please visit www.milsted-langdon.co.uk

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