Dim Outlook for British Businesses

The Bank of England Credit Conditions survey was released yesterday. It highlighted that the lack of credit available to businesses continues to act as a brake on Britain’s economic recovery.

The survey reported that British banks are expected to keep business lending flat over the next three months. It reported that this is largely due to increasing fear of a worsening economic outlook. Demand for credit from medium sized business increased significantly, whereas demand for credit from small businesses decreased. Lenders reported the sharpest fall in household demand for mortgages since the third quarter of 2008. We’ve also seen the biggest increase in demand for credit card lending since 2007.  

Louise Beaumont, Head of Public Affairs & Marketing at GLI Finance, offered her take on the situation:

“With credit availability remaining unchanged despite increased demand for lending from medium sized business, today’s figures once again highlight the failure of the credit eco-system for SMEs. Nearly 500,000 businesses are either deterred or rejected by the high street banks every year, many of which are high growth and successful, so more must be done to ensure SMEs have the fuel to grow.”

“The alternative finance industry, which passed the £1 billion milestone for lending in 2014, may only provide 2.4 per cent of annual business lending, but it is growing exponentially and actively supporting businesses ripe for growth currently being failed by traditional lenders.”

“A better referral system used by the traditional players for SMEs seeking finance is fundamental to addressing this issue and would help ensure alternative and more tailored credit solutions can be offered. Too often SMEs go through the rigmarole of applying for finance through the traditional credit committee approach, but this takes too long and often comes back with the wrong answer, and worse still, often without alternative suggestions. Ensuring SMEs are not led down a dead end when seeking finance is vital if we are to ensure this fundamental constituent – contributing nearly 50% of our economy and 60% of private sector employment – is given the necessary means to grow.”