Banks fail­ing firms decade af­ter crash

Yorkshire Post - - FRONT PAGE - MARK CASCI BUSINESS EDITOR ■ Email: mark.casci@ypn.co.uk ■ Twit­ter: @MarkCasci

Lend­ing plum­mets to small en­ter­prises

FUND­ING TO small busi­nesses from the bank­ing sec­tor has plum­meted in the decade since the fi­nan­cial cri­sis, hold­ing back job cre­ation and eco­nomic growth, The Yorkshire Post can re­veal.

To­day marks 10 years since the col­lapse of US bank­ing gi­ant Lehman Brothers, an event which pre­cip­i­tated the fi­nan­cial cri­sis that plunged most de­vel­oped na­tions into re­ces­sion, re­sult­ing in the loss of thou­sands of UK jobs.

Anal­y­sis of Bank of Eng­land fig­ures seen by this news­pa­per has shown that, de­spite a large rise in the num­ber of small and medium-sized busi­nesses in Yorkshire and the UK, the avail­abil­ity of cap­i­tal to help them grow has stalled.

In Yorkshire and the Hum­ber there has been a 17.8 per cent in­crease in the num­ber of SMEs from 2011 to 2017 yet there has only been a 0.8 per cent in­crease in the num­ber of bank loans to SMEs in this time.

Na­tion­ally, the amount loaned to small com­pa­nies has de­clined by 27 per cent since 2009, de­spite the num­ber of com­pa­nies in the coun­try over­all hav­ing in­creased to more than six mil­lion.

An­a­lysts at fi­nance firm Growth Street, which car­ried out the re­search, said this level of lend­ing was in­suf­fi­cient to sus­tain growth for the SME sec­tor and was hav­ing a knock-on ef­fect of sti­fling em­ploy­ment and pro­duc­tiv­ity.

The news comes amid fears for the po­ten­tial for an­other down­turn in the econ­omy, with com­men­ta­tors warn­ing that lessons from the 2008 crash have not been learnt and that an­other stock mar­ket crash could hap­pen in the very near fu­ture. Greg Carter, chief ex­ec­u­tive of Growth Street, told this news­pa­per: “If you look at the av­er­age amount of lend­ing in Jan­uary 2009 ver­sus De­cem­ber 2017, there has been a huge gap that has opened up and if business were able to bor­row the same amount that they were in 2009 there would be an­other £18bn of over­draft lend­ing alone, never mind other forms of SME lend­ing.

“So the gap is a lot big­ger than we re­alised and I think that is one of the key fac­tors that is hold­ing back pro­duc­tiv­ity growth in the econ­omy.

“As well all know, the cri­sis of 2008-09 was not caused by SME. No bank ever went bust lend­ing to SMEs.

“The SME pop­u­la­tion has been the un­fairly-af­fected by­stander. Bank cap­i­tal re­quire­ments have dou­bled in the past 10 years in terms of how much money they must have in re­serve.

“SME loans are re­quired to have more cap­i­tal held against them than other forms of lend­ing.

“That makes SME lend­ing less prof­itable than other more stan­dard forms of lend­ing like con­sumer loans and con­sumer mort­gages.”

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