British banks increased their lending for small to medium businesses (SMEs) last year, with term lending rising by 11% throughout 2005 to a total of £33.3bn, according to the latest data released by the British Bankers’ Association (BBA).
However, despite the increase, annual growth in term lending was actually down from 19% for the previous year, suggesting that banks have become more cautious in the face of toughening economic conditions.
The figures showed a good year for banks, with 515,000 small businesses establishing the first banking relationship during 2005, and a marginal increase of 0.5% throughout the year in the number of SMEs opening current or deposit accounts.
Overdraft lending also saw an increase of 10% over the year to £8.8bn, suggesting that more small businesses are struggling to operate their accounts without going into the red.
The data also revealed that many SMEs rely on online banking, with over 41% of those questioned choosing to use the internet to keep on top of their finances.
The survey was conducted among small businesses with an annual turnover of less than £1m. The banks involved were Abbey, Alliance & Leicester, Bank of Scotland, Barclays, Clydesdale, HSBC, LloydsTSB, Royal Bank of Scotland and The Co-operative Bank.
Commenting on the results, BBA deputy chief executive Sally Scutt said: “Half a million new banking relationships during last year demonstrate the banks’ commitment to providing services and appropriate finance for small businesses. Though annual growth in structured term lending decelerated during 2005, deposit growth held up, so the net position of the small business sector was in balance."
© Crimson Business ltd. 2006
