Small business lending dropped by 6% in 2016

Report suggests that tougher lending criteria and a reduction in "investment intentions" has resulted in a decline in lending

Despite dropping significantly in one year across the top 10 UK cities, lending to small businesses has shown signs of a return to health in 2016 – according to Hampshire Trust Bank’s SME Growth Watch Report 2016.

Run in partnership with the Centre for Economics and Business Research (CEBR), the report found that between Q4 2014 and Q4 2015, there was a 6% decrease of £2bn in lending levels across the UK’s 10 major cities, with a 12% (£4bn) drop since Q2 2013 – when city data started to be collected.

Unsurprisingly, London businesses were lent the most in 2015 (£77bn), but only experienced a 6% drop in lending levels, while Edinburgh and Manchester saw a 9% and 8% decrease respectively.

Of those surveyed, 58% said they felt confident about securing finance over the next 12 months, while the British Banker’s Association (BBA) suggest that small business lending has picked up again over the course of 2016.

Businesses in the North East and North West were the most positive, where 70% were confident that they could secure growth finance, compared to just 60% in London. Medium sized start-ups (64%) were also more confident than smaller businesses (57%), while only 11% saw access to finance as a barrier to growth.

Nina Skero, managing economist at CEBR, said: “Despite the confidence displayed by small businesses about securing finance in the future, the past data shows a steady decline in lending.

“We believe the reason for that is two-fold as a tougher lending criterion has meant that some small businesses that have wanted to borrow have been unable to do so. At the same time, some firms have reduced their investment intentions, partially as a consequence of an unstable economic environment.

Mark Sismey-Durrant, chief executive at Hampshire Trust Bank, commented: “For too long, larger lenders have dominated personal and business banking and this has had a negative effect on small businesses, which often do not meet the lending criteria.

“However, small businesses are right to be confident about the future as there are different finance providers out there, away from the high street banks, which are able to support smaller businesses with their expansion aspirations.”

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