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Small and medium-sized enterprises (SMEs) in the north of England are suffering from bank overdraft cuts far more than their London counterparts, according to finance supermarket Funding Options.

The study found that 55% of northern SMEs have seen their overdrafts reduced or withdrawn altogether in the past two years, compared to just 25% in London.

Funding Options said the figures show that the £5 million cut from business overdrafts per day over the past four years have not been evenly distributed across the country.

Recent high street bank statistics from Royal Bank of Scotland (RBS) show that economic growth in the North-West is currently 2.6% per year, while growth in the North-East is running at just 2.4%. Both trail economic growth in London, which is running at 3.3% per year.

Conrad Ford, CEO of Funding Options, said: “Reductions in small business overdrafts are cutting off the fuel for the 'Northern Powerhouse'.

“The ongoing reductions in overdrafts for small businesses is the hidden credit crunch, and while the whole country has been affected, the North has been hit a lot harder than London.

“As the banks have been forced to reduce their exposure to small business lending, they have focused on overdrafts as a risk that can be eliminated with relative ease, and at short notice.

“We’re now approaching the end of the business overdraft as a tool for working capital.”