Lending Increases to SMEs
High street bank lending to small businesses increased by £271 million in March, according to the latest report by the British Bankers Association (BBA), writes Emma Allen.
The increase represented a five per cent jump over lending figures for the same period last year and it caps a steady rise in each of the first three months of 2009, the BBA said. Small business deposits were also up by £881 million in March.
“March also saw an upturn in the number of new small business banking relationships – over 52,000 – which brought the total in the first quarter up to a figure similar to the first quarter of 2008,” said BBA statistics director, David Dooks. “This is despite the more difficult trading environment.”
The BBA attributed the “encouraging” figures to better banking support for small firms, as well as individual bank pledges to improve access to finance. But a spokesman warned that it was too early to start predicting that the worst was over.
“The results should be taken as proof that the banks are continuing to lend, but there is little doubt that for most small firms, business conditions remain difficult,” he said.
The BBA figures come in the wake of the Treasury Committee’s findings, published earlier this month, that small businesses were still finding it difficult to secure bank lending. MPs also criticised banks for increasing fees and charges for small business borrowers, and called for more regulation to protect customers.
Steve Hughes, economic adviser at the British Chambers of Commerce, welcomed the BBA figures, however, saying the increase in lending may indicate that last year’s tight credit restrictions for small firms are beginning to ease.
“Following the chaotic and arbitrary nature of bank lending practices at the end of 2008, some semblance of normality has seemingly returned,” he commented, adding that fair bank lending was vital to economic recovery.
“Government initiatives to support the banks are having a positive effect, and will continue to do so. When the UK moves towards growth, it is vitally important that SMEs have good access to finance, and that must be granted in a fair and efficient manner,” he said.