Bank funding still a problem for Scotland's smaller businesses

Smaller companies are continuing to struggle to obtain funding, according to new research yesterday which highlights a fall in Scotland's overall corporate debt.

Accountancy firm PWC said borrowing facility needs at the end of 2010 stood at about 39 billion, down by some 6bn on a year earlier.

The research, conducted in conjunction with the University of Strathclyde's Fraser of Allander Institute, notes a need to increase corporate investment "if the private sector is to play an active role in helping Scotland meet its ambitious economic growth targets".

PwC said an examination of the debt picture across the corporate sector highlighted a "flight to quality". Companies with a turnover of more than 1bn saw a 3 per cent increase in borrowing during 2010, while below that threshold there was a 30 per cent fall in total debt.

David Leslie, head of corporate finance at PwC in Scotland, said: "Many of Scotland's businesses have focused on streamlining operations, improving operational efficiencies and undertaking cost and working capital reduction programmes to secure their existence.

"Anecdotally, our perception is that there are real challenges on the supply side, particularly for smaller businesses, as banks continue to pursue a flight to quality on smaller balance sheets."