Banks tell small firms to borrow more to grow

 
Tim Wallace
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PRODUCTIVITY in the UK is being held back by small firms’ reluctance to borrow, the British Bankers’ Association (BBA) argued yesterday.

Borrowing makes firms more likely to innovate, export and plan growth, the group said.

The plea for small- and-medium-sized enterprises (SMEs) to borrow more comes after several years of banks being blamed for cutting off small firms’ credit lines, and marks a mood reversal for the industry.

“One of the worries about the recovery is that there is so far little sign that Britain’s productivity is improving,” said BBA chief economist Richard Woolhouse.

“Innovation is one of the most important ways businesses can make themselves more productive.”

“The fact that firms who won access to bank finance were 32 per cent more likely to have innovated suggests that if more businesses felt confident about applying for credit, our national productivity rates could receive a significant boost.”

The study, using data from BDRC-Continental’s SME monitor, found 37 per cent of all SMEs innovated in the last year, compared to 49 per cent of those who successfully applied for loans.

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