Bankers’ reluctance to lend to small businesses could put Britain’s recovery at risk, according to James Mallick, operations manager at transport and logistics recruiter Top Gear Recruitment
Recent research from the British Bankers’ Association (BBA) shows that while new loans to small firms increased by £75m between May and June 2010, year-on-year term lending has decreased by £269m, compared to June 2009 – when the economy was still in recession. The industry has now set up a taskforce with government to look at how best banks can work to help rebuild the economy.
“Obviously some businesses are a credit risk and as a result of the tough economic times, there may now be more in this category than there were 18 months ago. However, if there continues to be a stranglehold on cash flow, this situation will only worsen. If the coalition can increase lending by applying pressure on the banks, SMEs won’t miss out on orders and ultimately recovery.”
British Bankers’ Association chief executive, Angela Knight, says: “Banks are well aware of their responsibility to society and our commitment to support the economy by lending to individuals and firms. The return of profitability to the banking sector is a positive sign and indicates that the sector is helping the UK economy move out of recession.
“Banks have made repeated commitments to support business. There are funds available to lend to firms with a viable business plan. But the industry’s ability to support the economy needs to be considered as the increased capital and cash we are required to hold cannot both be set aside and used to finance lending.
Matthew Goodman, head of policy at the Forum of Private Business, adds: “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.”