SME lending slumps by £200m in July amid Brexit uncertainty
LENDING to small businesses in July slumped by £200m from the previous month, new figures from the Bank of England show.
The statistics, released on Tuesday, showed that the annual growth rate of small- and medium-sized enterprise borrowing came in at 0.7 per cent in July.
In contrast, lending to large businesses – those with annual turnover of £25m or over – increased by £8.2bn last month, with an annual growth rate of 6.3 per cent.
The Federation of Small Businesses warned that “unprecedented uncertainty” was hurting smaller firms’ appetite for finance.
“Small businesses appetite for new finance is waning against a backdrop of unprecedented uncertainty, anaemic domestic growth and inflationary pressure weighing on consumer demand,” said Mike Cherry, the trade body’s national chairman.
“Investment intentions are not where they should be and firms will only seek growth finance again when they have a clearer sense of what the future holds.”
The winding down of the Funding for Lending scheme and reports that the European Investment Fund (EIF) is already scaling back could threaten small businesses if such measures are not quickly replaced, he added.
“We look forward to feeding in to the Treasury’s financing growth consultation to ensure we have the right mechanisms to replace these sources of support post-Brexit,” he said.
“They represent vital lifelines for ambitious and innovative small businesses aspiring to grow and scale-up.
“A botched withdrawal from the EIF would mean a significant shock to small business finance markets. We need to see its replacement finalised sooner rather than later.
“It is crucial that negotiations with the EU 27 on the UK’s exit are productive and guided by economic rationality on both sides. In particular businesses urgently need clarity and certainty on the nature and length of transitional arrangements once we have left the EU.”
Read more: The SME’s guide to P2P