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Banks 'unlikely to change business lending behaviour'

Date Added: 07/06/2013  

A new report has shown the extent to which business lending issues in the UK are affected the health of smaller, innovative companies across the country.

Official figures show business lending fell during the first quarter of the year, despite the government's efforts to increase the flow of credit to firms in need of finance by teaming up with the Bank of England to launch the Funding for Lending Scheme last year.

The report from economic thinktanks the Big Innovation Centre and the Work Foundation - Credit and the crisis: Access to finance for innovative small firms since the recession - claimed innovative companies are being affected more than most by the squeeze on credit.

Author Neil Lee argued that the growth of the UK economy depends on the success of investments in new services and products. The UK economy grew by only 0.3 per cent in the first quarter of 2013, narrowly avoiding slipping into an unprecedented triple-dip recession.

He said: "Yet it is harder for innovative small firms to obtain finance than their peers. A lack of finance for the firms which need it most will be a long-term drag on the UK economy. Without action from policymakers, banks are unlikely to change their lending behaviour."

It was revealed in the report that out of all the small to medium-sized enterprises (SMEs) that were seeking finance in 2010/12, over half of them had difficulties finding it, while one in four did not receive any funding at all.

Official data showed business lending fell by £300 million in the first quarter of 2013, which could lead to firms in need of finance needing to take business debt advice to avoid being served with a winding up order.

Paul Fisher, the Bank of England's executive director for markets, stated the business lending figures are around what had been expected at this point, even though the Funding for Lending Scheme aimed to increase the amount of money being loaned to SMEs.

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Posted by Michael Beam

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