Loans to Firms Halved; Banks Warned They Are Putting Recovery at Risk

Daily Mail (London), July 31, 2010 | Go to article overview

Loans to Firms Halved; Banks Warned They Are Putting Recovery at Risk


Byline: Sean Poulter Consumer Affairs Editor

GREEDY banks have slashed the value of loans offered to small businesses by almost half in the past two years.

An average [pounds sterling]564million a month is lent to small firms - down from [pounds sterling]663million in 2009 and [pounds sterling]991million in 2008.

And, if current trends continue, by the end of the year High Street banks will have cut new lending to small firms by a staggering [pounds sterling]5.11billion compared to two years ago - a move which experts warn could - a move which experts warn could put economic recovery 'in jeopardy'.

Stephen Alambritis, head of public affairs at the Federation of Small Businesses, said: 'These reductions in loans are nothing short of outrageous.

'The loss of money to invest in businesses is literally costing thousands and thousands of jobs.

'The Government should be calling in the High Street banks and demanding an explanation. We cannot go on like this as it puts the recovery in jeopardy.'

The fall in new lending means that the value of outstanding loans to small firms has dropped by [pounds sterling]1.36billion since last September to stand at [pounds sterling]45.8billion.

Once small business overdrafts are added to the equation, lending to this group totals [pounds sterling]54.3billion.

But the banks are sitting on a record [pounds sterling]56billion deposited in current accounts by successful small firms - some [pounds sterling]1.7billion more than they are lending to the sector.

The Governor of the Bank of England, Mervyn King, said this week that he was 'heartbroken' by the way the banks were refusing to lend to small firms.

There are 4.8 million small and medium-size enterprises in the country, employing 13 million people, or 57 per cent of the private sector workforce.

Average new lending each month in 2010 is lower than it was in 2009, despite the fact the nation is supposedly through the recession.

The Daily Mail has launched a 'Make the Banks Lend' campaign to expose the ruthless treatment of small firms at the hands of lenders who refuse to supply the funds they need to function. Earlier this week, the Business Secretary, Vince Cable, outlined plans to hit British banks with a tax unless they use their cash to lend to small firms rather than pay out millions in staff bonuses.

The loan figures were revealed in the small print of a report published by the British Bankers' Association yesterday.

The organisation claimed the drop in lending was the result of a fall in demand from small businesses rather than a tough line by banks. …

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