Fears of company closures as banks tighten grip on lending
ISME stresses immediate recapitalisation plan needed to free up credit
ISME chief executive Mark Fielding
Friday November 21 2008
Small businesses continue to be crippled by the lack of lending from the banks and more than 50pc of SMEs have been refused access to finance in the past few weeks, according to new figures.
Small business group ISME said yesterday that the immediate recapitalisation of the banks was essential, as was pressure on institutions to use the available European Investment Bank funding, as well as a change to lending policy.
The new figures come as the Government continues its recapitalisation talks with bank chiefs, and the UK government plans to throw a lifeline to its SME sector in an admission that its £37bn bank bailout has, so far, failed to boost lending to business.
Yesterday, ISME, which has over 6,000 members, said that the Government was bereft of ideas as the credit crisis was leading to company closures and job losses with intervention essential to free up lending.
"The crisis affecting small businesses is deteriorating on a daily basis and is so serious that companies, which have successfully traded through previous recessions and downturns, are indicating that they will have no option but to reduce staff or close up shop unless they get badly needed finance," it said.
Of the companies surveyed, 74pc have been in business for over 20 years, while half have been in existence for more than 10 years.
Mr Fielding added that the association has received an unprecedented number of calls from irate members over the last week outlining the withdrawal of support from banks nationwide.
Guarantee
"The Government has acted, through the guarantee scheme, to ensure that we continue to have a banking sector. They now need to ensure that banks lend, or we will not have a small and medium business sector.
"It is no exaggeration that the very fabric of the business sector will be destroyed," he added.
In the UK, Chancellor Alistair Darling is to underwrite new loans to small businesses as part of a package of measures to help the sector amid Tory claims that the credit crisis was "strangling" companies.
Mr Darling is also likely to announce measures to help businesses that have lost insurance cover as the credit crunch hits supply chains. He is also expected to announce a sharp increase in funding for an existing scheme, where small companies can apply for bank loans that carry a 75pc taxpayer guarantee, under certain conditions.
- Ailish O'Hora Business News Editor
