Research by accountants UHY shows that outstanding loans to British businesses now stand at $673bn, down from $775bn in December 2008. This is the second-fastest fall among the G8 group of countries.
The UK ranks 18th out of the 22 countries surveyed in terms of the fastest growth rate of loans to businesses.
The British government has seen little success in its attempts to boost lending to businesses post-Lehman Brothers as banks looked to repair their balance sheets by reducing their loan books.
In contrast, all of the BRIC nations have increased their lending to businesses by double digits since the collapse of Lehman Brothers. Of the major developed economies, only the US has seen a faster fall in business loans.
On average, BRIC nations have increased lending to businesses by 62 per cent since December 2008. This compares to an average decrease of 4 per cent in funding among the G8 nations.
The country with the fastest increase in loans to businesses is China, where the amount of debt held by businesses increased by 65 per cent since the onset of the credit crunch. Chinese banks have approximately $6.9trn in outstanding loans with businesses, compared to $4.2trn in December 2008.
“Lending to businesses, particularly small businesses, is a key barometer of economic prosperity,” says Ladislav Hornan, managing partner at UHY Hacker Young. “Starved of fuel in the form of credit, it can be difficult for SMEs to move up a gear, expand and create jobs. In an increasingly globalised world, if a small business cannot expand to fulfil an order, that order can be lost to a better financed overseas competitor.
“The challenge for the UK Government is to show that it can play a major role in reversing this trend.
The country which has seen the largest reduction in the value of loans to businesses is Ireland. The value of outstanding loans to businesses has collapsed by 42 per cent since December 2008 from around $224bn to $129bn.