The Office for National Statistics have conducted research across 20 EU member states, surveying 2,165 Small and Medium Enterprises, only to discover that lending to SMEs in the UK has fallen much more than in other EU countries. This latest research is evidence that the government need to offer more encouragement and support for SME lending.
The data shows that a larger number of companies were seeking business loans in 2010 than before the recession. The number of approved bank loans for SMEs, fell to a new low of 65 percent last year, from 88 percent in 2007, a drop of more than 25 percent. The drop in approved business loans for France, Germany and Italy was much less than the UK figures, although Spain had a sharp drop in number with a third less approvals. Ireland’s approval rate decreased by almost half.
The figures for 2010 show that more UK SMEs applied for business finance, despite a reduction in the number approved. However, since the data is only relevant to 2010, the impact of Project Merlin has yet to be assessed. According to Sir Mervyn King, Bank of England governor, the figure for SME borrowing had dropped by five percent, or £5 billion, which suggests that finance has worsened in 2011. Whether the figure for business lending has reduced as a result of decreased demand from SMEs or whether banks aren’t lending remains unclear. The British Bankers’ Association insist that there are funds available for business loans, but the demand from businesses has fallen.
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