Banks are increasingly nervous about extending credit to small companies, according to data compiled by Reuters and interviews with lenders and business heads, as rising costs of debt, labour and raw materials put the business case of lending to such companies under unprecedented strain.
Such companies account for 48% of private sector employment and about 1.6 trillion pounds, or 36%, of turnover, according to the Federation of Small Businesses , citing government data that defines small firms as having up to 49 staff. Stephen Pegge, head of commercial finance at bank lobby group UK Finance, pointed to evidence that small and medium enterprises more broadly were securing credit - banks lent 6.5 billion pounds to companies with less than 25 million pounds turnover in September, BoE data shows.
Forty-two percent of applications for funding in the third quarter failed, up from 39% in the second quarter of the year, the survey found, while one-in-five firms seeking finance were quoted loan offers at interest rates higher than 11%. Others like Douglas Grant, CEO of Manx Financial Group, called for a permanent state-backed loan scheme to protect SMEs, saying this could act as the "fundamental difference between make or break for many companies and, in turn, our economy".Naresh Aggarwal, associate director of policy at the Association of Corporate Treasurers, which represents business finance staff, said banks were taking a pragmatic approach to lending as the economy falters to avoid costly writedowns.
Major banks have already set aside hundreds of millions of pounds of extra cash to cover potential losses.
Welcome to Tory Brexit Britain where the Tory blame the people for their mess.
Food security first. emmanuel_dombo
just do another brexit lmao
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