SME lending vital to curb recession
Oct 24 2008
The government needs to pressure banks to lend to SMEs as a way of combating a shrinking GDP, says an economic adviser from the British Chamber of Commerce (BCC).
This follows a report by the Office of National Statistics (ONS) which revealed the economy’s gross domestic product is at -0.5 per cent, the first signs of negative growth since 1992.
David Kern, economic adviser to the BCC, says that along with a reduction in interest rates and business taxes the government needs to ‘insist that the vital flow of bank finance to small firms is maintained’.
He adds: ‘While it is important not to talk ourselves into a slump, urgent steps are needed to alleviate the worst consequences.’
Recent discussions between top bank officials and the government, in an attempt to free up bank lending to SMEs, remained inconclusive.
Angela Knight, chief executive of the British Bankers’ Association (BBA), says: ‘We have to be clear that as talk turns to recession it seems inevitable that some businesses will not survive, even with the best assistance that banks, government and voluntary agencies can give them.’
The figures released by the ONS showed that a slowdown in services and production were the main drivers of negative growth, with distribution, hotels and restaurants being the largest contributors to the decrease in activity of services.
However, economists say the country is still not officially in a recession, as we have not yet reached two consecutive quarters of negative growth.
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