Newspaper article The Evening Standard (London, England)

Until SMEs Regain Their Mojo, I Don't Believe in This Recovery; ECONOMIC ANALYSIS

Newspaper article The Evening Standard (London, England)

Until SMEs Regain Their Mojo, I Don't Believe in This Recovery; ECONOMIC ANALYSIS

Article excerpt

Byline: Russell Lynch

HOW confident are our businesses over the recovery? There's been conflicting evidence this week. If Lloyds' latest business barometer is to be believed, the feelgood factor over trading prospects is at its strongest since September 2007 -- and optimism over the wider economy at an all-time high.

But look elsewhere and the signs are less promising. If businesses are so confident, then surely, maybe, they would be looking to take on credit and invest? The evidence points to the contrary. The Bank of England's latest figures on loans to small and medium-sized businesses showed lending fell another [pounds sterling]400 million in September. The total stock of outstanding loans to SMEs has headed steadily lower over the two years or so Bank has been collecting the data, dropping by almost [pounds sterling]30 billion (see graph) since early 2011.

Don't forget that the latest indications of investment-wary SMEs come after the Bank specifically tweaked its Funding for Lending scheme in April to encourage the banks to shovel cash at smaller firms sooner rather than later. For every [pounds sterling]1 of net lending to smaller firms this year, banks are able to draw down [pounds sterling]10 in ultra-cheap funding from Threadneedle Street, reducing to [pounds sterling]5 in 2014.

Six months on, this looks a flop. …

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