It has been a bit of a mixed bag of news coming out of The Bank of England this week.
Firstly, its Monetary Policy Committee (MPC) has increased its UK economic growth forecast for the first quarter of the year, it was revealed today. But this news follows a report from the bank that showed lending to small businesses were on the decline.
According to minutes from the MPC’s latest meeting, the projected growth of the UK's economy has been upped from 0.9 per cent to one per cent. Prosperous industrial production and strong household spending figures were behind the upwardly revised figures, while the minutes also showed that the MPC voted unanimously to keep interest rates on hold at 0.5 per cent.
However, the Bank of England's latest report examining lending trends in revealed that lending to UK businesses has fallen by £500 million in the three months to February 2014; a frugality that could be particularly damaging to Britain’s small businesses and those looking to raise funds for business acquisitions.
While banks attribute the lack of lending to using cash reserves to pay off debt instead, John Allan, national chairman of the Federation of Small Businesses, said it is a serious issue that must be addressed to help small businesses and the UK economy more broadly.
“This [report] underlines the ongoing challenges small businesses face in accessing finance to meet their growth ambitions. As the economy continues to gain momentum, ensuring small firms have access to finance is critical,” Allan said.
For the UK as a whole, the news has not been altogether bad; evidence is growing to suggest that Britain’s economy is on the road to recovery. For small businesses, however, the lending practices towards them from big banks remain an obstacle to growth and acquisitions – something which is sure to continue to be hotly debated in coming months as investigations into the matter are ongoing.