Lending ‘famine’ hurts small business growth

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A LACK of confidence in bank’s willingness to lend is harming the growth prospects of Britain’s small businesses (SMEs) and jeopardising the economic recovery, two leading trade bodies today claim.

The warning comes as the BDRC independent finance monitor reveals that the number of firms using any form of external finance dipped to a new low of 39 per cent in the first three months of 2013. That was down from 41 per cent in the final quarter of 2012.

John Longworth, director general of the British Chambers of Commerce (BCC), said: “The latest figures are concerning because they show a continued deterioration in companies’ confidence when dealing with financial institutions.

“It is disheartening to see that the availability of external finance remains a barrier to growth for many businesses.”

Phil Orford, chief executive of the Forum of Private Business, said: “The decline in bank lending appears to have continued into 2013. If this trend continues into Q2 and Q3, eyebrows may be raised with all the talk recently of [economic] recovery.”

The BDRC survey said small firms’ confidence that their banks will agree to a future lending request fell to 40 per cent in Q1 2013 from 43 per cent in the final three months of last year.

Among “would-be loan seekers”, 40 per cent said they had felt “discouragement” had stopped them applying for a loan.

Longworth added: “Although it is understandable that first-time applicants remain among the least successful when applying for loans, many of these will be young and fast-growing firms who aren’t getting the funding they need to expand.”

Orford said: “This data confirms what we’ve been saying for months.”