Bank lending to businesses will hit its lowest level this year since
2006, despite government efforts to stimulate lending, a report suggests.
The Ernst & Young Item Club forecasts that business lending will
fall by 4.6% to £429bn in 2012 from last year, the fourth consecutive annual
decline.
In what can be described as a Catch 22 situation the Banks say demand
for loans is low, while many businesses argue banks are unwilling to lend.
Latest figures from the Insolvency Service show that 986
firms went into administration, receivership or a company voluntary arrangement
in the third quarter of this year.
There are many businesses stagnating - being kept alive by the
forbearance of banks, rather than being shut down as they would have been
during previous recessions.
Research shows 146,000 businesses are in fact 'zombies', whereby at best
they are able to pay the interest on their debts but not reduce the debt
itself.
After every credit binge there is always an overreaction but unless there
can be a freeing up of funds to business then it will continue as a drag factor
on the economic recovery.
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