Reduced levels of bank lending to small and medium businesses in the UK over the past year have been contributed to by high borrowing costs.
This is according to the latest comprehensive nationwide survey by the Centre for Economics and Business Research (CEBR), which found that bank lending has decreased by 4.5 per cent in 2010.
Many small and medium businesses have been put off from applying for bank loans because of the high cost of borrowing. Tough new EC banking laws agreed lately could mean that costs will increase even further over the next twelve months as banks are forced to increase their capital cover ratios.
The study also revealed that business confidence has dropped over the course of the year among firms with less than 250 employees. These businesses account for over £1.6 trillion of annual revenue – compared to just £1.4 trillion of annual revenues generated by FTSE 100 firms. SMEs also generate 53 per cent of total business tax contributions.
The CEBR urges the UK government to drop the small companies corporate tax rate below the 20 per cent rate due to come into effect next year.
