Funding plan hitting SMEs

Tim Wallace
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SMALL firms are being harmed by the government’s drive to push down interest rates, a bank claimed yesterday, suggesting George Osborne would be wrong to try to funnel more cheap cash through banks in his budget tomorrow.

Falling interest rates have cost small- and medium-sized enterprises (SMEs) up to £1.4bn per year on their deposits, according to research from the Cambridge and Counties Bank.

In 2008 a business with £10,000 in a deposit account received an average interest rate of 2.93 per cent on their cash.

Now that rate stand at just 0.69 per cent after the Bank of England has held the base rate at 0.5 per cent for four years, while the Bank and the government have provided lenders with cheap funds since August under the Funding for Lending Scheme.