Research shows access to finance is 'worsening'

This revelation comes amid reports that the government is getting tough with banks for failing to provide affordable lending to small companies.

Business secretary Vince Cable has hit out at ‘misleading’ banks’ claims that, despite demand for lending being low, approval rates are high.

In a green paper launched yesterday entitled ‘Financing a Private Sector Recovery’, banks could face penalties for failing to boost lending to small businesses.

According to the forum’s latest Economy Watch survey, there is ‘significant latent demand’ that is not being met by banks, contrary to claims made by several lenders.

The forum’s July survey shows that loan facilities for the 358 members on the Economy Watch member panel have declined by £66,000 during the past month, while overdrafts were down by £34,500.

This deterioration comes despite an anticipated requirement for external finance of £1,057,000 per month, recorded in January 2010.

In all, one per cent of respondents said that access to finance has improved, compared with three per cent in May, and 15 per cent said it has worsened – almost four times the number in May when four per cent reported a decline. In addition, 67 per cent have seen no changes in their ability to access to finance.