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Fall in loans to UK businesses the second fastest among major economies


19/03/2012

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...of loans to businesses is Ireland. The value of outstanding loans to businesses has collapsed by 42% since December 2008 from around US$224 billion to US$129 billion.

The research reveals, however, that some EU countries — Italy and France, for example - actually increased the value of loans to businesses, despite many of their banks being financially impaired by the sovereign debt crisis in the Eurozone.

“Lending to businesses has become one of the most hotly debated issues during the financial crisis. The risk is that businesses — particularly SMEs — are being starved of competitively priced funding as a result of the shrinkage of the banking sector," Ladislav Hornan, Managing Partner of UHY Hacker Young, the UK member of UHY commented.

“Among the G8, only U.S. banks have shrunk their loan books faster since the onset of the credit crunch. The concern for UK businesses is that with banks reluctant to lend, they are unable to invest and be internationally competitive.

“The four BRIC nations have seen their lending to businesses grow at the fastest rate. While part of that growth is driven by higher inflation, it still shows the gulf in performance between the UK and faster growing economies.”

A recent report commission by UK banks — called the SME Finance Monitor -revealed that 40 per cent of businesses which applied for a loan for the first time were turned down. Less than a third — around 30 per cent — were ‘offered what they wanted and took it’.

“Lending to businesses, particularly small businesses, is a key barometer of economic prosperity," Ladislav Hornan said.

"Small businesses are the engine of economic growth, but starved of fuel in the form of credit it can be difficult for them to move up a gear, expand and create jobs. In an increasingly globalised world, if a small... continued on page three >

 

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