SME credit a point of concern following BoE figures

Business lending in the UK fell by almost £2billion in December, according to the latest figures from the Bank of England.


This is worrying for many companies, as the current economic climate is said to be better placed than at any point in the recent past.


Instead, business groups are raising concerns about the possibility of funding chancels being ‘damaged’, especially in the light of figures showing net lending to SMEs fell by 1.2bn in December.


This coincides with a £1.9bn fall in net lending to non-financial firms, which follows on from a £4.6bn drop in November, suggesting finance from bank sources is not forthcoming.


Instead, companies are facing the threat of liquidation without funding assistance, unless they can boost sales or restructure the business to find additional funds.


The Bank reported recently that credit availability is up, but it would appear there is a gap between what is available and what is actually being lent.


Widening disparity between large and small corporations


A widening disparity between interest rates offered to SMEs and big corporations is a further point of concern.


Small loans of £1m or less are seeing their rates increase – albeit by only 0.04 percentage points – but the gap in lending is highlighted by a 0.59 percentage point fall on loans of more than £20m.


It would seem therefore, that startup companies are receiving the bad end of the deal when trying to access finance.


“SME credit remains something of a worry,” said Michael Saunders, chief UK economist at Citigroup.


His views were echoed by John Longworth, Director General of the British Chambers of Commerce who described the figures as “hugely disappointing”.


 “It is very concerning that young, fast-growing businesses are becoming increasingly disillusioned with the current lending system, as they are the firms who are finding it hardest to secure finance,” he said.


A full scale corporate recovery procedure could assist companies that are struggling with finances, while other aspects, such as tackling energy usage and waste could also reduce costs.


By Phil Smith


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