Small business lending worsens as EU funding dries up

New data highlights a £698 million fall in bank lending to non-financial businesses in July and reports that the European Investment Fund (EIF) and European Investment Bank (EIB) are withholding funds from the UK.

Commenting about the data, Mike Cherry, Federation of Small Businesses (FSB) National Chairman, said: “These figures confirm that small business borrowing is down, corresponding to lower investment intentions and confidence levels. Only one in seven small firms are currently applying for external finance, with demand for bank loans falling significantly over the last year, although this is not driven by a switch to alternative lending.

“These trends add to a convergence of factors that could threaten small business finance, investment and growth ambitions in the medium-term. Reports that the EIF and EIB may already be starting to withdraw support in the UK have raised the alarm, while the Funding for Lending scheme ends in January. This makes the Government’s extra commitment of resources for the British Business Bank and a National Investment Fund even more important, and we look forward to feeding in to the Treasury’s Patient Capital Review.

“A botched withdrawal from the EIF and EIB would turn a currently mixed outlook into a decidedly bleak one. We need to see small firms confident to apply for finance for growth, with the Government clearly mapping out what will eventually replace the half a billion pounds of EIF support received in recent years.”