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BCC warns lending curbs to SMEs will damage recovery

Date Added: 08/01/2014  

The British Chambers of Commerce has warned that Britain’s rapid economic recovery will be hindered unless the government acts to encourage banks to lend to small and medium-sized businesses (SMEs).

According to a survey carried out by the BCC, economic growth will remain steady this year but continued restrictions on lending to SMEs will curb the pace of expansion.

Research produced by the government demonstrated that bank lending to SMEs has been declining since 2009 and shows no signs of improvement. Bank lending for firms with an annual turnover of less than £1 million have suffered the most due to these restrictions.

David Kern, chief economist at the BCC, said: “On its part, the government has to work to increase the flow of lending to growing businesses through a fully-funded Business Bank, to ease the logjam of those firms striving to expand.” 

The BCC suggest that five key measures of manufacturing are at an all-time high, alleviating fears about the growth in the sector being temporary. Domestic orders, employment, employment expectations, turnover confidence and profitability confidence were all performing well alongside export sales and export orders.

John Longworth, director general of the BCC, said it was "pleasing that the spurt in manufacturing has proven not to be a fluke, which demonstrates the dynamism of our small, high-value, manufacturing sector".

However, he cautioned against complacency after the survey discovered that cashflow restrictions and a lack of access to credit was restricting investments in new equipment and sites. 

Suren Thiru, a UK economist at the BCC, said: "When we speak to members they say the big issue is the lack of access to finance and the detrimental impact investment will have on cashflows. It is clear there are still significant issues around bank lending."

Mr Longworth warned that the recovery must be maintained and SMEs must have access to finance in order to expand. By rectifying this issue, he believes the UK’s economy can move from being “merely good to being truly great.”

The industries that demonstrated the strongest growth included computing and IT, transport and communication, financial services and business-to-business services. 

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