A survey from the Federation of Small Businesses has revealed that four in 10 small firms applying for credit are refused
The latest ‘Voice of Small Business’ Index – the Federation of Small Business’s quarterly small business confidence survey – reveals that big banks have renewed a squeeze on lending which is shutting small businesses out.
The survey, which gained 2,842 responses, shows that four in 10 small firms is now refused credit, a fact which has contributed to a tenth consecutive quarter of layoffs among small firms. A net balance of 3.9% of those surveyed said they had made staff cut backs in the last quarter.
Despite these pressures however businesses remain convinced of growth opportunities in the future.
Fifty per cent of small businesses say they plan to grow their workforce in the next 12 month – though Q2 does show that growth plans have become more circumspect as firms revised the expected rate of growth downwards. Just over seven per cent expected rapid growth in the Q2 survey compared to over 10% in Q1.
Responding to these findings FSB has long called for more competition in the banking sector. It says this is essential if small firms – which collectively produce more than half Britain’s GDP – are able to access the reasonably-priced finance they need.
John Walker, FSB national chairman, said: “If small firms cannot access credit it constrains their investment plans. We know from past research that many small businesses missed growth opportunities because they couldn’t access the money they needed.”
The FSB has encouraged the Chancellor to ensure the proposals on increasing competition laid out by the Independent Commission on Banking are seen through in his Banking Reform White Paper, issued last week.
The FSB also asks that the new ‘funding for lending’ scheme is accelerated and backed up with a clear reporting system so that tangible evidence is available of finance reaching small firms.
FSB represents small businesses across 17 sectors and its latest survey found that confidence had fallen in all but two – health and social work and motor servicing.
Manufacturing declined less than other sectors, such as retail and entertainment, but was on a par with sectors such as IT.
The best retention of confidence regionally was seen in the North East.