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Businesses ΓÇ£ReluctantΓÇ¥ to Borrow

Businesses ΓÇ£ReluctantΓÇ¥ to Borrow

Business growth is suffering according to the British BankerΓÇÖs Association (BBA), with a reluctance to borrow being fuelled by an uncertainty around the continued fragility of the UK economy.

Reporting on the ΓÇ£weakΓÇ¥ demand in June 2011, the BBA stated that repayments outstripped borrowing and that new business lending decreased, highlighting the building sector as one of the most heavily affected areas.

Quoted in the Business Insider, BBA Statistics Director David Dooks stated that:

“Businesses, as has been seen elsewhere, are concerned about the economic outlook and, in weathering difficult trading conditions, they are putting off expansion or investment plans and limiting borrowing.”

Of course British Banks have repeatedly been hit with criticism over the increasingly ΓÇ£unattractiveΓÇ¥ lending offers they are making available to those businesses seeking credit, leading to many pundits suggesting that demand has not decreased ΓÇô only the viability of the lending on offer.

One of the most vocal in this debate to my mind has been Business Secretary Vince Cable, whose seemingly bi-monthly ΓÇ£threatsΓÇ¥ to the banking community and ΓÇ£pledgesΓÇ¥ to UK businesses appear to have yielded no change what-so-ever in the doctrine of the British Banking Industry when it comes to releasing the finance needed by start-ups and SMEs ΓÇô all of whom have repeatedly been praised as the future of the UK economy.

In what is sure to leave an angry lump in the throats of many, the BBA also revealed that lending to financial companies “rallied” to £9.3bn – no doubt creating visions of those risk takers who contributed to the financial collapse being given a second bite of the apple.

This is of course unrealistic and at best a gut-led emotional response, with the term financial companies clearly covering a wide range of businesses. But while the reality may reveal otherwise, it is the very notion of a bias still existing toward high-risk high-reward firms that is sure to cause a gritting of teeth amongst British Business owners and tax payers.

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Author: | July 26, 2011 | 0 Comments

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