Lending To Businesses Falls Again

Online, October 25, 2010 (Newswire.com) - The BoE said that, while credit conditions were easing for larger firms, they remained tight for smaller companies. However, the bank also conceded that lending remained subdued, as businesses concentrated on paying off existing debts rather than taking on new ones.

The bank did report a fall in the cost of borrowing, with interest rates at their lowest effective levels since August 2007.

Lobby groups including the Forum of Private Business (FPB) have warned that businesses will be unable to create jobs and contribute to the economic recovery if access to finance is not improved.

In some cases, small businesses may be able to increase their chances of approval by supplying more up-to-date accounts, as those currently filed with Companies House will cover the worst of the recession last year, and more recent figures may show an improvement.

It has been suggested that returning greater authority to bank managers may improve the situation but such a change is not likely, with Lloyds Banking Group stating this week that it was poor decision-making by managers in the past that led to them being stripped of this power.