LONDON, Sept 5 (Reuters) - Britain’s small and medium-sized businesses (SMEs) have cut back on borrowing in the past quarter, a survey showed on Wednesday, highlighting the government’s uphill struggle to boost economic growth by unblocking the flow of credit.
Britain entered its second recession in four years in late 2011 as government spending cuts and the euro zone debt crisis have weighed on growth.
Small businesses have been particularly hard hit as banks, facing higher capital requirements, rein in lending. Various government schemes aimed at improving the availability of financing have so far failed to boost the economy.
The quarterly SME Finance monitor, commissioned by the Business Finance Taskforce, found 43 percent of the 5,000 SMEs surveyed in the second quarter used external finance such as bank overdrafts, loans and credit cards, down from 50 percent in the first three months of the year.
Looking ahead, 35 percent of the firms cited the economic climate as the biggest barrier to running their businesses versus 11 percent who considered access to finance as a major obstacle.
“There remains limited appetite for external finance, both looking back over the past year and forward to the next three months,” said Shiona Davies, director at BDRC Continental, which carried out the survey.
The survey found that businesses applying to renew loans or overdraft facilities were markedly more successful than those seeking funding for the first time.
Just over a third of those who would have liked to apply for a loan but did not said either they assumed they would be turned down or felt discouraged after making an informal enquiry at a bank. Others cited fears they would lose control of their businesses or that the process of obtaining a loan would be too difficult.
The latest plan to boost lending, the Bank of England’s Funding for Lending Scheme, opened on Aug. 1.
The scheme, which offers banks and other lenders cheap funding against a wide range of collateral if they agree to lend to businesses and home-buyers, largely replaces the previous National Loan Guarantee Scheme (NLGS).
The BDRC study found just 14 percent of SMEs were aware of the NLGS, and 65 percent said it would not have affected them anyway because they did not wish to take out the products it offered.