'Small UK firms hit as banks not lending'

Sep 17 2012, 15:14 IST
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SummaryEconomists forecast growth of 0.6 percent in the third quarter in a Reuters poll.

Confidence amongst small British companies fell over the summer, as weak consumer demand and a lack of credit continued to hamper firms' growth prospects, the Federation of Small Businesses (FSB) said on Monday.

The FSB's Voice of Small Business index, based on a survey of nearly 2,600 companies, dropped almost six points to -4.5 in the third quarter, with confidence declining in ten out of twelve British regions.

The business services sector and small manufacturers continued to perform well, but those firms that rely on discretionary spending were less confident, the FSB said.

However, confidence remains still stronger than in the fourth quarter of 2011, when the escalation of the euro zone debt crisis pushed Britain back into recession.

The message is clear though -- businesses want to grow and invest but they need a helping hand to do so, John Walker, the FSB's National Chairman, said.

The survey showed that businesses that want to grow remain troubled by a lack of finance, with the number of refused loan applications rising, the FSB said.

Finance minister George Osborne has launched a number of initiatives to get credit flowing through the economy, though he has rejected calls to loosen his flagship austerity programme, aimed at erasing the country's huge budget deficit.

The government has also announced the creation of a state-backed business bank though details are still unclear.

While it is urgent to address access to finance, it is critical to get the right structure in order for it to work properly, FSB chairman Walker said. It must be for the long-term and not just a short-term measure for the recession.

Britain's economy has contracted for three consecutive quarters since it plunged back into recession at the end of 2011.

With the economy slowly moving out of recession, economists forecast growth of 0.6 percent in the third quarter in a Reuters poll. However, a strong recovery is still seen as elusive, keeping the pressure on the government to support the economy.

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