08/12/2008 - Banks 'not lending to small firms'
A new study has revealed that many small businesses are still struggling to get affordable credit from banks, despite commitments to lend fairly.
Almost one in three firms (30%) have seen an increase in the cost of new or existing credit in the past two months, according to a survey of 500 companies by the Federation of Small Businesses (FSB). Meanwhile, almost two thirds of small businesses reported that trade had decreased in the past two months and 40% were being paid later for services and supplies.
This has led to more than a third having to consider laying off staff or cutting back on workers' hours. The survey also revealed that 40% of firms were thinking about closing down altogether, with a similar number not sure if they could continue hiring staff.
FSB chairman John Wright said: "With trade down and invoices increasingly being paid late, small businesses are having to turn to their banks for credit to tide them over. But, despite the Government's £500 billion bailout, the banks still do not seem to be lending to small businesses.
HSBC has announced it will make £1 billion of extra funding available to support small businesses in Britain through the recession.
The move was welcomed by ministers who have been calling for banks to resume lending to firms who are being pushed to the brink of collapse as credit dries up.
Copyright © Press Association 2008
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