Dramatic fall in business lending

Dramatic fall in business lendingNew figures from the Bank of England show that overall business lending fell sharply in June, although loans to SMEs increased slightly.

Lending to non-financial businesses of all sizes decreased by £5.5 billion in June, compared to the average monthly increase of £0.2 billion over the previous six months. However, loans to SMEs increased by £0.4 billion, compared to the average monthly decrease of £0.1 billion over the previous six months.

Dr Adam Marshall, executive director of policy and external affairs at the British Chambers of Commerce (BCC) said: "While we welcome the moderate growth seen in small business lending this past month, we must ask whether we can achieve the levels of business investment that the UK economy needs without bank lending playing a stronger role.

"It is concerning to see lending to businesses contract so sharply, which is a marked acceleration of the overall trend we've seen over the past five years. There are important questions about both the availability of bank finance, and companies' appetite for that finance, that still need to be answered."

Also this week, the Federation of Small Businesses (FSB) has warned that proposed changes to international banking rules could further squeeze lending to SMEs. New proposals from the Basel Committee on Banking Supervision, the group that sets global banking standards, would raise the amount of capital the banks are required to hold against certain loans, potentially making them more expensive.

John Allan, FSB national chairman, said: "Our research shows that small businesses are currently in a robust mood. But the Basel Committee proposals will make it harder for small firms to access funding and threaten to derail their ambitions for growth."

Anthony Browne, chief executive of the BBA, the trade association of the banking sector, said: "Small business lending did not cause the financial crisis and yet SMEs stand to lose out if these troubling new rules are introduced. We want the chancellor to put pressure on the Basel Committee to rethink these measures before they destabilise the borrowing prospects of our small businesses and first-time buyers."

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via Business Feeds

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