Lending to businesses suffered the biggest drop since 2011 at the end of last year, with business groups blaming the decline on “damaged” access to corporate funding channels.
Data released by the Bank of England shows that net lending to non-financial firms suffered a huge £4.6 billion drop in November, followed by a further decline of £1.9 billion by the end of 2013.
The figures also show that lending to SMEs fell by £1.2 billion. The situation has been worsened by interest rates, with the average rate on loans of up to £1 million up 0.04 percentage points since this time last year.
Experts are concerned about the damage this could do to the SME sector. John Longworth, Director General of the British Chambers of Commerce, said:
“It is very concerning that young, fast-growing businesses are becoming increasingly disillusioned with the current lending system, as they are the firms who are finding it hardest to secure finance.”
The British Business Bank was announced in 2012 by Business Secretary, Vince Cable, with an aim to potentially support £10 million of additional business lending.
Mr Longworth says that lending to SMEs can only improve if the Bank is given “more firepower”.