Survey Warns of Economic Danger from Banks Refusing Small Business Loans

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22nd June 2012 11:22 - Financial Services

A new study has revealed that UK banks are increasingly denying credit to small businesses.

The Federation of Small Businesses' (FSB) survey, which questioned 2,800 small UK firms,  found that more than four in ten such companies (41%) seeking a loan from High Street banks are being refused.

In addition, the research saw a drop in confidence amongst Britain's small businesses and entrepreneurs in every industry sector except in the health and motor industries.

With one in five firms claiming that access to finance is their main barrier to achieving the growth they aspire to, this represents a major issue.

The FSB has warned that this credit squeeze will reduce prospects for new job creation and further weaken the UK's ability to emerge from recession.

Particularly with regard to Scotland, the FSB has said that the need for additional players in the small business finance market is even more pronounced.

Andy Willox, FSB Scottish Policy Convenor, commented: "I take no pleasure in being proved right, but the FSB has long argued that without more flexible, affordable finance provided by a wider range of players, any hopes of a sustained Scottish recovery will remain some way off. The will of small businesses to grow is there, but the money to enable them to do so seems elusive.”

He added: “We welcome the Chancellor's Funding for Lending scheme but it will be delivered through the banks. None of the previous bank-led schemes has been an unparalleled success in funding the real economy. This scheme must be different."

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