In the agents’ monthly summary of business conditions, they report that “fear of repricing or withdrawal of existing facilities continued to discourage many small businesses from approaching lenders altogether.”
The Agents also found that many companies are scaling back investment plans, with some putting off making any new investment altogether.
There are 12 regional Agents, who cover the whole of the UK, discussing business conditions with around 700 companies across all sectors. In addition to the monthly reports, the Agents make quantitative assessments of economic conditions as seen from their respective regions.
The Bank’s Monetary Policy Committee (MPC) uses the intelligence gleaned from the Agents to assist its understanding and assessment of current economic conditions.
As far as lending is concerned, some banks are trying to keep the playing field level; Lloyds TSB promises not to change the availability of overdrafts during the period of an agreement as long as accounts are kept “within agreed terms and limits.”
And the RBS pledges not to withdraw overdraft facilities for 12 months after one is agreed, although that is subject to the condition that the risks associated with lending to a company don’t increase.
The report also noted that small businesses also face a lengthy process when applying for loans, with “elevated” fees.
However, the report also said that credit conditions had continued to ease for large and medium-sized firms, particularly those in the manufacturing sector, which might reflect improvements in the health of corporate balance sheets. But “increased nervousness about the outlook had led some firms to ... switch their focus back to paying off outstanding debts.”
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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