Business lending continues to shrink

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BUSINESS LENDING continued to shrink in the three months to February despite the improving economy, according to a Bank of England report.

Overall lending to UK businesses contracted by £500 million in the three months to February, although the pace of the decline has slowed from a £3.3bn fall recorded in the preceding three months, the Bank’s latest trends in lending report has revealed.

Small business groups raised concerns about the latest findings, while banks put the negative lending figures down to firms using large cash reserves to pay down their debts.

The Bank’s report said survey evidence indicates that pricing on loans to small and medium-sized businesses has remained “broadly unchanged” in recent months.

John Allan, national chairman of the Federation of Small Businesses (FSB), said this underlines the ongoing challenges small businesses face in accessing finance to meet their growth ambitions.

He continued: “As the economy continues to gain momentum, ensuring small firms have access to finance is critical.”

The Bank’s report quoted a recent FSB survey which found that the majority of small firms continue to find that credit availability is “poor”.

The Government’s Funding for Lending Scheme, which helped to boost mortgage lending last year by giving lenders access to cheap finance, has been re-focused towards helping businesses for 2014.