With business lending in the UK falling to the lowest levels since 2006 it is estimated that a £21bn deficit will hit smaller businesses particularly hard. The problem has come about thanks to the ongoing economic downturn and, despite the government’s insistence that we are now out of the recession, there is little sign of light at the end of the tunnel.
Reports state that lending has fallen by as much as 4.6%, this representing a total lending figure of £429bn. There is concern among industry analysts that lending will not reach the levels seen in 2008 for at least four years, meaning small firms have a struggle ahead just to survive. The problems have arisen thanks to the poor economic situation as well as the reluctance on the part of banks to lend, especially as they are facing serious problems in light of the PPI and Libor scandals which have had a serious impact on their available cash.
Improvement on the Cards
Although immediate returns to previous levels of lending are not forecast, industry analysts are confident that 2012 will be the last year of falling lending levels. If the country is genuinely heading out of the recession there may be positive news on the horizon, but the question remains as to how many smaller businesses will have failed by then in their attempts to weather the storm. Banks are frequently blamed for not supporting smaller businesses, but they are not the sole problem.
The business bank recently set up Business Secretary Vince Cable is also singled out for lack of progress. Accountants say that the intended lending from this government initiative is unlikely to cover the deficit that is being faced by Small and Medium Enterprises (SME’s). Quite what can be done to recover the situation is not clear, but it is hoped that 2013 will see a slight increase in lending levels and create a positive outlook for the future of smaller business in the UK.