New report claims lack of loans is slowing small business growth

Thu, 17 Mar 2011

The manufacturers' organisation EEF has published a survey that claims the current inability of small businesses to get credit or take out affordable business loans is affecting economic growth in the UK. It found that the difficulty of obtaining cheap credit was prohibiting growth, especially for smaller companies, despite there being a small improvement in the amount of finance available over the last couple of months.

The EEF report revealed that for the first two months of this year, the majority of businesses experienced a rise in the overall cost of credit of 32 per cent, an increase from the 19 per cent seen in the last quarter of 2004.

However, the cost of credit is still going up, although the government and leading banking institutions have agreed to increase finance availability to businesses in Project Merlin, with banks expected to provide GBP76 billion to small businesses in 2011.

Lee Hopley, chief economist at EEF, said "While there appears to have been some easing in availability, for many smaller companies the question is still 'at what cost and under what terms and conditions ?'"

He added "It is far from clear that, for small manufacturers in particular, we are on the path to easier access to more affordable finance . As a result there appears to remain a gap between the aspirations of Project Merlin and the reality on the ground."
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