Member Article

£5bn gap in lending to businesses

Lending to UK businesses was negative in the three months to February, the Bank of England’s Trends in Lending report reveals.

The report highlights that availability of credit was little changed for SMEs and large companies in the first quarter of 2013, and most major UK lenders reported that demand for credit was “mixed” across corporate sectors.

Stock of lending to businesses contracted by around £5bn in the same period. The decline was broad based across sectors.

Major lenders noted the emerging presence of non-bank lenders such as insurance companies and pension funds in the commercial property sector.

Adam Stewart, Marketing Director, Rakuten’s Play.com commented: “At the beginning of this month, small businesses received another blow as the Credit Conditions Survey showed that despite demand, bank lending wasn’t expected to increase over the following three months.

“The Trends in Lending report will also, undoubtedly demonstrate this, as SMEs continue to crave the support they continually lack. Although there have been reports from lenders that demands for loans have been minimal, our own research, focusing on the retail sector, revealed that nearly a third of retail professionals believe the government could do more to encourage banks to lend to retail businesses.

“The appetite for entrepreneurship and building a business from scratch is rife but without the means to bring business plans to life, how can our economy grow? SMEs cannot depend solely on bank lending and will need to focus on building an innovation business model to succeed. Our research shows that three quarters of retailers are looking to international trade as a significant opportunity to increase sales, while building an online offering can help smaller companies to reduce the overheads associated with high business rates on the high street.”

Phil Curtis, MD, First Data Merchant Solutions: “An element that is often overlooked when discussing business lending is the huge proportion of stable and growing merchants in the UK that are far from financial difficulty – they simply need a little extra finance to support their company growth. Rather than waiting on the government or business banks for financial support, these merchants could be developing their existing partner relationships.”

This was posted in Bdaily's Members' News section by Tom Keighley .