Small businesses 'starved of cash'

29/07/2010

Small firms are being destroyed by banks which are starving them of money, according to the Bank of England governor Mervyn King.

He told MPs that it was "heartbreaking" to see so many small businesses struggling or going under because banks refused to lend to them.

During the economic downturn, banks said lending was dropping because firms were not asking for money.

However, Mr King said: "For the banks to say there is no demand for credit is not an adequate response."

Recently, the Forum of Private Business suggested that there was "significant latent demand" not being met by banks when it comes to lending to small firms.

Only one per cent of respondents questioned in the forum's Economy Watch survey said access to finance had improved for small and medium-sized enterprises (SMEs) during the second quarter of the year, while 15 per cent said access to credit and finance had deteriorated.

Posted by Emma Noble