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Small businesses shunning debt, Bank of England figures show

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The Bank’s Credit Conditions Survey, published today, found that availability of credit for businesses “increased significantly” during the three months to December, but that demand from small companies was flat.

Stewart Baird, managing partner of Stone Ventures, said: “As the flat demand in the fourth quarter shows, many small businesses have effectively given up on the high street banks as a finance resource.

“The irony is that far more banks are reporting increased credit availability for smaller firms. If there is more money on offer, fewer small businesses are listening.”

“It’s becoming clearer and clearer that knocking on the door of the bank you have been with for a number of years is no longer the default option.”

On the other hand, demand for credit from mid-sized companies increased significantly, while availability remained flat.

Matthew Fell, CBI director for competitive markets, said: “This data shows that the availability of finance for growing business is improving and is likely to get even better this year. This news should give another boost to business confidence, especially for smaller firms, where demand for finance is still subdued.

“The cost of finance is also falling, but less so for smaller companies, so it’s right the Funding for Lending Scheme is now firmly focused on reducing the cost of lending for these firms.

“To keep up the momentum, the Government needs to hold the course on implementing changes to the banking sector in a clear and predictable way, particularly with unprecedented structural change on the horizon.”

The survey also found that the number of businesses defaulting on credit has fallen significantly.

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