INCREASING numbers of small businesses are being refused credit by banks, a new industry study showed today, damaging prospects for economic growth and jobs.
Although over 50 per cent of small firms want to grow their firms over the next year, 41 per cent of those who applied for credit were turned down in the second quarter, the Federation of Small Businesses (FSB) found.
The proportion looking to “grow rapidly” shrank from 10.9 per cent in the first quarter to 7.2 per cent this quarter, with one in five now saying access to finance is the main barrier to growth plans.
Already a net balance of 3.9 per cent of firms are announcing layoffs, and the FSB thinks this will get worse.
“The will of small businesses to grow is there but the money to enable them to do so is not,” said FSB chairman John Walker.
“Unless this is addressed effectively and rapidly, that confidence might evaporate altogether, with dire consequences for the economy.”
The business group praised the “funding for lending” scheme announced by the chancellor and governor of the Bank of England last week, which aims to see an £80bn increase in lending to firms and households, facilitated by the Bank taking risky debt from banks in exchange for government bonds.
It called for “a clear reporting process so that tangible evidence is given to show the money is being passed on to small firms and not just shoring up the banks.”