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Lending to small firms plummets at fastest ever rate

London, UK (28/07/2011)

LONDON (Startups) Soaring interest rates also reported by Bank of England study

Lending to small firms has fallen by the highest annual percentage on record, according to a new report from the Bank of England.
The Bank’s latest Trends in Lending study revealed that, in May 2011, lending to small businesses was 4.2% down on the figure 12 months earlier – higher than any previous year-on-year fall.

Furthermore, the average rate of interest paid by small firms on bank loans had reached 4.66% - making the cost of credit prohibitive for many emerging businesses.

In contrast, the report showed that bigger companies were benefitting from easier access to credit, and falling interest rates.

The new Trends in Lending report is the latest in a long line of negative assessments of bank lending over recent months.

As part of February’s Project Merlin agreement, Britain’s biggest banks committed to making more credit available to small firms; however, lending has thus far failed to hit the Merlin targets. In fact, over the first quarter of this year, the banks missed their small firm lending targets by £2.2bn.

Commenting on the Bank of England’s latest report, John Walker, national chairman of the Federation of Small Businesses, said that targets are not the answer to the lending problem; greater competition within the banking sector is the only solution.

He added: “It is the UK’s 4.8million small firms – the country’s job creators – that will help pull the recovery on to firmer ground, yet they are being given a worse deal than larger businesses.”

For further information please click here: http://www.startups.co.uk/lending-to-small-firms-plummets-at-fastest-ever-rate.html



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