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Credit conditions remain unchanged

Mar 31 2011

Lenders have seen a sharp fall in demand for credit from small businesses

The amount of credit made available to small businesses remains largely unchanged from Q4 2010, according to the Bank of England’s Credit Conditions Survey.

Lenders observed a sharp decline in demand for credit from small businesses in the first quarter of 2011, but expect this to pick up in the coming quarter in line with availability.

The report attributes the fall in demand to seasonal and weather-related factors, in addition to fiscal uncertainty.

The survey also reveals an increase in spreads on lending to small businesses, with some lenders commenting that this was due to rising operating costs.

Commenting on the survey, David Kern, chief economist at the British Chambers of Commerce, says, ‘The findings confirm that a lack of demand remains a major obstacle to adequate credit growth.

‘More worryingly, spreads on lending to smaller companies have increased, adding to pressures on their profits.’

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