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UK manufacturing is suffering a “hangover” from the credit crunch of 2007-08 that is hampering investment, according to industry body EEF.

It said that while most manufacturers are confident of securing finance, only a third are more likely to borrow money than they were two years ago.

EEF also revealed that 53% of firms would postpone or cancel investments if they couldn’t use their own funds. A separate BDO LLP report found there was a lack of confidence in the sector.

Manufacturing accounts for about 10% of the output of the UK economy. Manufacturing grew gradually from 2005 to 2008, at which point it took a dive in the financial crisis, in common with the rest of the economy.

It recovered from 2010 until the start of 2012, but its growth has been volatile since then.

The EEF report says that firms are “shunning” banks in favour of self-financing investment projects, which could potentially lead to lower investment levels.

Lee Hopley, the EEF’s chief economist, said: “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.

Meanwhile, a separate report into business confidence paints a particularly gloomy picture of the manufacturing industry.

The BDO LLP report said business confidence was at a three year low, but that the fall in sentiment after the Brexit vote was less than expected.

Peter Hemington, of BDO LLP, said: “Brexit has compounded the continuing slowdown of the UK economy, but there is opportunity as well as challenge ahead for UK businesses.

“The Bank of England’s decision to lower interest rates is a step in the right direction. We now need a concerted effort from government to lay the foundations for future growth.

“That means taking advantage of cheap borrowing costs to invest in UK infrastructure, encouraging prosperity across the regions and improving productivity.”

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