UK manufacturing faces pressure in 2016
EEF said 85% of the UK manufacturers were found to be confident of securing finance for a new business opportunity Getty

The majority of UK manufacturers continue to be reluctant to use external finance. They are against borrowing from banks and instead prefer self-financing, according to a report by industry body EEF.

EEF, which represents the engineering and manufacturing industries, added in its report that the reluctance puts at risk the growth and investment potential in the sector. The report was based on its survey carried out in February, before the country decided to leave the European Union (EU).

The survey found that 85% of the UK manufacturers were confident of securing finance for a new business opportunity. However, 65% of them said they would not opt for external finance. The survey also showed that while British manufacturers had solid intentions towards new investment ideas prior to the Brexit vote, 53% of them said they would cancel or postpone the investment if they could not self-fund the venture.

It was also found that about 55% of the companies surveyed were holding on to more cash on their balance sheets than before the financial crisis.

The findings indicate that the UK manufacturers' attitude towards bank borrowings has remained largely unchanged, despite considerable improvement in economic conditions and interest rates declining to historic lows.

"Manufacturers' reluctance to rely on external finance is a persistent hangover from the credit crunch, where trust and confidence in the banks stalled and never quite recovered. But with the Brexit vote dampening investment intentions and adding to uncertainty, this pre-existing condition could now become further aggravated, posing a risk for growth," Lee Hopley, chief economist at EEF, was quoted as saying by The Evening Chronicle.

This comes a day ahead of the final recommendations of the Competition and Markets Authority (CMA). The report said the CMA's final call on the competition failures affecting retail banking services for the small and medium enterprises would be critical.

Hopley added: "This makes the CMA's package of reforms even more important. The CMA cannot prevent a fall in investment intentions, but it can help to strengthen supply dynamics in the market and resolve some of these long-term issues by providing swift and firm remedies that pack enough punch to stop the rot."