Firms finding it harder than ever to secure finance

Increasing numbers of small and medium-sized businesses are struggling to access the finance they need in order to grow.

In fact, more SMEs are now reporting that the availability of credit and loans is a major problem than there were just three months ago.

This is despite the £200 billion that the Bank of England has pumped into the economy, by way of its quantitative easing programme, in an effort to boost commercial lending levels.

Those were among the findings of the latest Monthly Business Survey published by the British Chambers of Commerce (BCC).

A third (33 per cent) of those firms that responded to the survey said that accessing finance has been more difficult over the last three months. At the end of the second quarter, only 20 per cent of businesses thought that credit availability had deteriorated.

What’s more, the proportion of firms that have experienced easier access to finance halved to just 3 per cent, down from 6 per cent in the previous survey.

Lending, though, was not seen as the biggest obstacle to growth by the majority of the 400 firms polled. Almost two-thirds (64 per cent) cited weak customer demand as the most likely barrier to expansion over the coming 12 months. Access to finance registered 18 per cent, regulatory issues 10 per cent, and exchange rates and input costs both 4 per cent.

David Frost, the BCC’s director general, said: “Our latest survey results show that the biggest issue facing British businesses is still demand for products and services. This means that any economic recovery is still fragile.”

Nevertheless, Mr Frost added that it was clear that the huge sums that have been injected into the financial system by quantitative easing are still not reaching SMEs on the scale required for businesses to invest for future success.

Mr Frost concluded: “The pre-Budget Report must include measures that encourage companies to invest and improve confidence. Announcing that 2011’s planned increase in National Insurance contributions will be scrapped would be a good start.”