Lending To SMEs Remains Weak

Fri, 06 Aug 2010

Lending to small businesses is weakening, despite a rise in business loans between May and June 2010, according to the Forum of Private Business (FPB).

Latest figures from the British Bankers’ Association (BBA) show that bank lending to small and medium enterprises (SMEs) rose by £75m between May and June to £598m.

However the FPB stress that despite the increase, the June figure is some £269m less than the total amount of money lent by Britain’s banks in June 2009.

Average monthly business loans have declined by almost half since 2008, when banks lent an average of £991 million to SMEs despite being in the grip of recession. The average monthly loan rate for 2010 currently stands at £564 million.

According to the BBA, overall lending has fallen this year despite small firms increasing deposits into banks by £2.5 billion over the past four months.

Matthew Goodman, head of policy at the FPB said: "Our own research shows that both loans and overdrafts have decreased since the start of June – at a time small businesses need more finance in order to expand."

"The need for finance is only going to increase as the economy grows and as small firms, which must be the catalyst for sustained economic recovery, try to meet renewed demand."
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