Banks not lending enough to small business

Britain’s banks lent out a relatively small £900 to small businesses over the last year according to industry official statistics, which is less than the annual rate average of the last five years.

Politicians and small businesses have criticized banks for not supporting the grass roots industry and lobby groups are taking hold of the statistics from the BBA (British Bankers’ Association) as proof that there is more to be done.

A spokesman for the FSB (Federation of Small Businesses) stated that the credit demand is just as strong as in previous years, but small business is starting to lose faith in lending from banks because of the rising cost of finance.

The BBA statistics show that lending to SMEs increased from £54.4 billion in 2010 from £55.3 in 2009.  Over the prior five years lending grew on average by about £4 billion.  Director for the BBA, David Dooks, stated that the numbers show a reduction in the credit demand.

The BBA also added within the report that it recognizes trends in customers that are willing to pay off their loans and instead increase their savings.

Last year the report showed that customers paid off £11.6 billion of non-mortgage debt and credit card debt over 2010.  Net mortgage lending was only £7.8 billion which is less than a tenth of its increase in 2006 when it reached £110 billion.

The banking industry paid a total of £12 billion in corporation tax throughout 2008 and currently employs 420,000 staff.