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Last Updated: Jul 31st, 2011 - 17:29:39 |
Darling urges more lending to small businesses
By Andy Bruce and David Milliken
Jul 27, 2009, 19:22
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LONDON (Reuters) - Chancellor Alistair Darling told banks to lend more to small businesses on Monday, though surveys showed some firms are now finding it easier to raise bank loans and get finance from debt markets.
Large companies could raise more finance via corporate bonds in the second quarter of 2009 than in the first as liquidity and price transparency improved, according to respondents in the Bank of England's quarterly Asset Purchase Facility report.
Smaller firms were also able to borrow more in June, when bank lending to small businesses rose by 391 million pounds, the British Bankers' Association said.
"These figures provide more evidence of the High Street banks' support for small businesses," BBA Director David Dooks said in a statement.
But Chancellor Alistair Darling said progress had been clearer in lending to bigger companies and for home purchase.
"While in some areas there have been improvements, in others there is an awful lot more to do," he told reporters after meeting the chief executives of major banks.
"I think in relation to small and medium-sized enterprises, we need to be satisfied that the lending agreements entered into are honoured and that every single business gets a fair deal," he added.
Darling will meet bank executives again in September.
Insolvency Service figures show some 5,000 British companies went into liquidation in the first three months of 2009, many of which were refused vital credit from crisis-stricken banks keen to cut their liabilities.
The Bank of England introduced an asset purchase facility to help stimulate lending in the economy in February, which was later funded by 125 billion pounds of newly created money in a policy of quantitative easing. The money has largely been spent on government debt, but also on corporate bonds and commercial paper.
The Bank said in April it would be some time before the impact of the programme would be known, but on Monday it hinted that it was starting to influence the wider economy.
"The continued purchases of assets by the Facility during the second quarter of 2009 were accompanied by signs that conditions in corporate credit were improving," the Bank said.
MORTGAGE LENDING STILL SHORT
But so far there has been little evidence of an improvement in property lending.
House prices in England and Wales were flat for a third consecutive month, property data company Hometrack said on Monday.
A broad-based recovery in house prices was still a long way off, with the market hamstrung by rising unemployment and a shortage of mortgage finance, said Richard Donnell, Hometrack's director of research.
"A lack of mortgage finance, low buyer confidence and growing fears of unemployment are currently being offset by increased demand, a pick up in sales and a growing scarcity of housing for sale," he said.
Last week, the Council of Mortgage Lenders said gross mortgage lending fell 48 percent year-on-year in June, likewise adding that the reduced number of active lenders would inhibit recovery. It left its gross mortgage lending forecast of 145 billion pounds this year unchanged.
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