By Francesca James

Loans from UK banks to businesses have been cut by £28 billion since the collapse of Lehman Brothers two years ago, says Aldermore, the new British bank.

According to statistics from the Bank of England, the amount of loans outstanding to businesses is now £471 billion, down from a peak of £503 billion in September 2008. After Lehman Brothers filed for bankruptcy on September 15 2008, the availability of loans to businesses went into a free fall. (See graph below)

Aldermore says that this is hitting SMEs the hardest as they don’t have as many options to find alternative funding as larger businesses. For example, SMEs cannot raise funds by issuing bonds and only in rare cases can they raise extra money through rights issues.

Phillip Monks, Chief Executive of Aldermore, says: “We are worried that the fall in lending to businesses is just going to be filed away in the “too difficult to deal with” drawer.”

“SMEs are the engine of the British economy, but they can’t power on for ever if their ability to make vital investments and to hire new staff is compromised. This is particularly worrying as the deficit tackling measures mean the private sector must take more of their strain.”

“There are still many healthy, promising businesses out there that are being refused funding from high street banks and this is simply because banks don’t have the balance sheet strength to lend to smaller companies. Two years on from the Lehman collapse we must ensure this issue does not get kicked into the long grass.”

Aldermore says that the Government needs to ensure that schemes such as the Enterprise Finance Guarantee (EFG) and the Business Payment Support Service (also called “Time to Pay”) are still supporting businesses as much as they were when they were first launched.

Philip Monks says: “Evidence shows that lending to SMEs under the EFG scheme is on the decline whilst “Time to Pay” is not as accessible as it used to be. Businesses would benefit greatly if this could be improved.”