SMALL FIRMS LEFT TO STARVE; despite Bank Bonuses and Brown's Repeated Pledges, 60% of Businesses Are Still Being Denied Loans

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Byline: Tim Shipman Deputy Political Editor

SIX out of ten firms were turned down for bank loans last year, a shock survey reveals today.

Bosses have been forced to borrow on their credit cards because bankers are still refusing to lend them money.

Yet, as thousands of firms struggle to survive, the bankers who brought the economy to its knees continue to line their pockets with huge bonuses.

Today Barclays is expected to announce record profits of [pounds sterling]11billion and a bonus pot of [pounds sterling]4.5billion. Other banks are set to follow with results over the next fortnight, and it is predicted that 10,000 City workers will walk away with pay and bonuses topping [pounds sterling]1million each.

Today's survey by the Institute of Directors makes a mockery of boasts by Gordon Brown and Chancellor Alistair Darling that the Government ordered the banks to start lending again as payback for pumping [pounds sterling]850billion into the economy.

IoD director general Miles Templeman said: 'The fact that more than half of all businesses seeking finance last year were turned away by their banks is totally incompatible with the banking sector's position on the state of lending in the UK.

'What is even more concerning is that having been rejected, 83 per cent of businesses are not receiving information about alternatives available to them, including the Government's Enterprise Finance Guarantee.

'It seems that more businesses are turning to forms of unsecured finance, such as credit cards, to get them through their short-term spending needs.'

The IoD survey of 1,000 businesses is particularly significant because the Institute represents company directors who employ an average of 20 to 30 people - the very entrepreneurs whose desire to expand will be critical to creating jobs and dragging Britain out of recession.

The survey raised questions over the degree to which Labour has helped business get back on its feet. Official figures show that just [pounds sterling]2.4billion of a budget of [pounds sterling]18.7billion earmarked for aiding cashstrapped firms has actually been spent. There were 27,000 corporate insolvencies between the second quarter of 2008 and the third quarter of 2009, a record number in any British recession.

Shadow Chief Secretary to the Treasury Philip Hammond said: 'This research makes a mockery of Gordon Brown's claim to be giving real help now to businesses and to have extracted legally binding guarantees from the banks to lend more in exchange for taxpayer support.

'Thanks to his incompetence, more businesses have gone to the wall in this recession than in any other, while many more are being deprived of the credit they need to invest and create the new jobs we need for a sustainable recovery.'

The IoD survey also contradicts claims by the Treasury that lower lending figures are due to businesses not wishing to borrow cash to expand or develop during the economic downturn. Surveys by the Department of Business, Innovation and Skills (BIS) have claimed that three out of four businesses got the money they wanted. …