Business bank accounts face tightened bank lending

Holders of UK business bank accounts had a rough go of it last month, with bank lending conditions tightening, experts say.

Business loans are becoming increasingly harder to come by, with new regional information from the Bank of London revealing that some lenders had essentially closed off the property, consumer services, and construction sectors to lending of new working capital.  Smaller and larger firms alike reported tightening credit conditions, with lenders more and more reluctant to provide overdraft facilities and demanding increased security for their investments, while those banks that still extended credit to such firms would do so by charging higher arrangement fees on reduced loan to value ratios.

Regional agents for the Bank of England reported that weakening employment and business investment comprised the backdrop for the financing issues, with consumer confident showing little to no signs of improving, according to retailers. Some even said that most consumers may have come to expect heavily discounted goods, declining to purchase anything that is not reduced in price.

Manufacturing and business services output did report growth, albeit slowly, according to regional agents.  The construction sector was found to have contracted, but agents added that it was a moderate decline.

The suppliers of essential goods or goods for export increased manufacturing input, such as the hi-tech and food production industries, said agents.  However, construction and domestic household sector- related goods demonstrated particular supplier weaknesses.

Pay settlements were also down, with last year’s typical pay raise amounting to around 2.2 per cent.  An annual private sector firm survey indicates that 2012 pay expectations stand at around 2.1 per cent.

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