SMEs in the firing line as banks cut lending

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SMEs in the firing line as banks cut lending

Simon Quicke

Credit for SMEs is set to become an even bigger headache as the volume of lending from the major banks drops.

A warning sounded by Ernst & Young groups SMEs along with those individuals with credit prolems as likely to be the hardest hit as loan lines are tightened.

The accounting firm has revealed it expects bank lending to fall for the first time since 2009 and the level of corporate lending to SMEs could contract as much as 5.7%.

The drop in lending is as a direct result of the funding crisis taking place in the banking industry but will compound financial problems that the channel is already having getting credit.

Neil Blake, senior economic adviser to the Ernst & Young ITEM Club, which forecasts on the market, said that the warnings about the impact of the banking crisis on lending had been sounded for some time.

"But this is the first time there will be an annual contraction in total loans since 2009, when the UK economy was still suffering from the immediate effects of the global financial crisis," he said.

"Funding for small and medium-sized enterprises is likely to be particularly difficult to obtain as banks seek to reduce credit risk," he added.

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