Press Release
March 2009: Bank of England statistics – headline figures obscure the real problem of SME lending
Bank of England figures on corporate lending obscure the true poor state of lending to SMEs says Sheffield city centre accountants UHY Wingfield Slater.
UHY Wingfield Slater says that although the Bank of England statistics show that overall lending by UK banks to corporates has not declined substantially the availability of credit per SME in need of financing is well down.
The Bank of England figures state that overall lending by banks to UK non-financial corporates increased by 10.8% per annum in Q4 2008.
However, UHY Wingfield Slater says that many smaller companies have been crowded out of the bank lending market by larger borrowers who might normally have tapped the corporate bond market and potentially high growth companies who might have tapped the AIM market or private equity funds for finance.
UHY Wingfield Slater points out that the amount of money raised on AIM by UK companies in 2008 slumped by 76% in 2008 to just £2.5 billion from £10.7 billion in 2007.
UHY Wingfield Slater says that the higher interest margins demanded by banks from smaller borrowers, especially those who have few physical assets to borrow against, means that some companies have even shelved expansion plans and have stopped making applications for bank borrowing.
Said John Wingfield, partner at UHY Wingfield Slater: “The Bank of England figures should not be misinterpreted as showing that all is rosy in the garden.
“Our experience and that of business advisers across the UK is that funding for SMEs is very hard to come by. We have to do more and more shopping around for our clients. Foreign banks have cut lending to UK SMEs or in some cases, such as the Icelandic banks, have had their operations shut down.
“These figures do not reflect the reality for many SMEs and should not encourage complacency. The Government should be looking at how it can help equity funding for businesses as well as debt funding.”
John Wingfield says there are steps that the Government could take to improve the capital raising abilities of AIM and other providers of equity to SMEs.
He added: “Obviously the Government can’t click its fingers overnight and improve the supply of equity investment but it could start to reintroduce some of the tax advantages to investing in small companies on AIM and through private equity and VCTs that it so recently scrapped.”
John Wingfield also says that the Government should undertake regular reviews of its new loan guarantee scheme to ensure that the level of red tape involved is kept to a minimum and that applications are processed quickly.
“Announcing initiatives is one thing – making sure they work effectively is another,” he commented.
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