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FPB: Business lending shows patterns of decline

Date Added: 03/06/2013  

Business lending in the UK is continuing to decline, with the Forum of Private Business suggesting "meaningful" economic growth cannot happen until this slide is arrested.

Commenting on the BDRC Finance Monitor, which showed the number of firms using external finance dropped to a new low in the first three months of 2013, chief executive of the forum Phil Orford stated there are patterns of decline within business lending.

He explained that despite the green shoots of recovery within the UK economy - after growth of 0.3 per cent was recorded for the first quarter - small to medium-sized enterprises (SMEs) need to be able to access loans.

"It seems likely that the banks are still licking their wounds - and that may be the case for some time to come yet - but this pattern of decline can't continue if we are to have meaningful growth," he said.

The BDRC Finance Monitor showed that only 39 per cent of SMEs are actively seeking credit, perhaps as they do not believe they will be approved for a loan.

Mr Orford stated that any economic recovery in the UK this summer is going to come "largely from firms spending their own stockpiled cash, but this isn't sustainable in the long term".

He noted a "crunch point" could be on the way and called for lenders to do more to help those SMEs that are trying to grow and boost the economy as a result.

Fellow business group the Confederation of British Industry (CBI) recently told firms they ought to look for alternative methods of financing as a result of the business lending situation in the UK.

Launching a new alternative finance guide - Ripe for the picking - chief policy director at the CBI Katja Hall noted small companies are the backbone of the economy, but need to consider options such as peer-to-peer lending if they are to grow and provide the boost required to steer the nation away from recession.

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Posted by Michael Beam

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