Tax & Accounting News

Firms struggle to access cash

06/07/2009

The effects of the credit crunch are still hitting businesses hard, with business lending suffering its biggest drop in nine years.

The Bank of England’s quarterly review of lending trends found that lending to businesses slumped to just £7.9billion in May – down from £12.6billion in March. Even among firms which had managed to secure finance, they were often paying more for that borrowing.

The bank expressed concern that a lack of working capital could lead to more firms laying off workers or going out of business altogether over the next few months.

Eight out of ten firms who responded to the survey reported that lending had become scarcer and more expensive over the past year, with two-thirds saying they had cut back on investment as a result.

The bank reported that many firms were attempting to reduce the amount of debt they were carrying, but for others they had little option but to renegotiate existing borrowing facilities, often agreeing to shorter-term and sometimes more costly credit.