Banks failing firms decade after crash

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.”