Bank lending to small firms still falling

The research, carried out as part of the BDRC Finance Monitor, showed the number of firms using external finance dipped to a new low in the first three months of 2013, with just 39 per cent of SMEs (small and medium-sized enterprises) actively seeking credit.

Phil Orford, chief executive of the Forum of Private Business, said: “The decline in bank lending appears to have continued into 2013, which perhaps won’t come as a shock to many. But if this trend continues into Q2 and 3, eyebrows may be raised with all the talk recently of recovery, not to mention the Government’s ‘supercharging’ of the Funding for Lending scheme.

“It seems likely that the banks are still licking their wounds, and that may be the case for some time to come yet, but this pattern of decline can’t continue if we are to have meaningful growth.”

Jonathan Oxley, chairman of the West Yorkshire branch of the Institute of Directors, said: “I don’t think anyone in business has really been in any doubt that bank lending to businesses has been declining further.

“The banks continue to be beset by problems and are mostly focused on reinforcing their balance sheets as best they can. The Funding for Lending Scheme has stimulated mortgage lending but made no discernible impact on business lending.”