‘Lack of lending behind the surge in company closures’

The Forum of Private Business (FPB) is highlighting a record drop in lending as the main reason behind the increase in company insolvencies.
 
According to The Insolvency Service, there have been 5,055 compulsory and voluntary liquidations in England and Wales during the second quarter of 2009 – a 2.9% increase on the previous quarter and a 39.1% rise from the same quarter of 2008.
 
The latest data from the Bank of England shows that lending to small businesses dropped by £14.7 billion during the same period – the biggest slump since 1997, when the Bank’s records began. The rate of applications for finance under the Government’s Enterprise Finance Guarantee (EFG) has also fallen.
 
“A variety of factors are contributing to soaring insolvencies, but they all lead to the same major symptom – a lack of cash,” said FPB spokesperson Phil McCabe. “Some banking bodies are claiming that lending to small businesses has improved following the Government’s intervention, but our research has consistently shown that demand for finance is not being satisfied by the supply from lenders. When finance is available, it is often far too expensive.”
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