Firms report tighter lending, stable inflation expectations
Euro area firms reported a strong net increase in bank loan interest rates and other financing costs in Q2 2026. Despite tighter conditions, financing needs rose slightly, while inflation expectations remained largely stable.
Lending tightens, demand holds
Euro area firms reported a strong net increase in interest rates on bank loans (net 42%, up from 26% in Q1 2026), affecting both SMEs and large firms.
Other financing costs, including charges and fees, also rose for a net 31% of firms, while collateral requirements increased for 10%.
Despite these tightening conditions, firms signalled a small increase in financing needs for bank loans (net 2%), with availability remaining broadly unchanged (net -1%).
However, loan availability diverged, rising for large firms (net 4%) but declining for SMEs (net -4%).
This resulted in the bank loan financing gap widening slightly to 3%, up from 2% in the previous quarter, indicating persistent challenges for businesses seeking external funds.
Fewer firms now expect external financing availability to deteriorate in the future, suggesting some stabilization in outlook.
Inflation outlook steadies
Firms anticipated a more moderate rise in selling prices, non-labour input costs, and wage expectations over the next 12 months.
Selling prices were projected to increase by 3.2% (down from 3.5%), with non-labour input costs, including energy, expected to rise by 5.2% (down from 5.8%).
Wage expectations eased further, set to increase by 2.5% (down from 2.8%).
Firms' median one-year-ahead and three-year-ahead inflation expectations remained stable at 3.0%, while five-year-ahead expectations edged up slightly to 3.1% from 3.0%.
The perceived general economic outlook continued to be the main factor constraining external financing, affecting 29% of firms, though banks' willingness to lend improved slightly.
Navigating new uncertainties
The survey highlights how firms are adapting to a complex environment, from supply chain diversification to energy efficiency.
While AI investment plans show a clear preference for internal funding, the reliance on traditional bank loans for broader needs remains strong.
This dual focus underscores the ongoing challenges for businesses, balancing immediate operational resilience with long-term technological transformation.