Small business leaders renew calls for credit

Feb 17 2009 by Graeme King, The Journal

SMALL business leaders have called for a renewed effort to free up credit for North East companies after research showed the Government’s much heralded £1bn loan guarantee scheme was not working.

A report yesterday said only £12m of lending had resulted from the scheme nationwide, and greater efforts were needed to oblige banks to lend in the way the Treasury wants.

Colin Stratton of the Federation of Small Businesses, said: “We have done a small survey and the scheme is not working for most of the respondents – even for those who have been with the same bank for a long time.

“The Government needs to enforce it more. The banks have still got their own issues within their own organisations, so their approach (to lending) is lacklustre. It’s time to realise that small businesses drive the economy. There is a real problem here, and we are lobbying government to sort it. The UK is a business and if they don’t do something soon, it will grind to a halt.”

However as many entrepreneurs lose confidence it could be that fewer are asking for loans and delaying investment until the economy gets stronger.

Ross Smith, head of policy at the North East Chamber of Commerce, said: “With these measures, we were never expecting an instant turnaround, however the numbers seen from the loan guarantee scheme are a little disappointing. They highlight that there are two issues to be addressed: the willingness and ability of banks to lend, and the confidence of businesses to borrow and invest.

“I think there is a confidence issue at the moment. There is so much uncertainty that businesses are holding off on investment decisions – it’s not just the availability of lending.”