Small business bank account investment growth sluggish, says BoE

Regional agents for the Bank of England reported recently that while investments in business ventures gradually rose last month, there are no signs that the influx of funds will fuel much economic recovery.

In addition to the bleak news, they also cautioned that job creation in the economy’s private sector remained aenemic, and that the availability of business loans and other lines of credit was much tighter than it was prior to the economic downturn. The BoE also said that small business bank account holders were experiencing particularly high levels of difficulty in securing venture capital.

Businesses are investing in refurbishing their existing capacities, BoE agents said, instead of investing in new or expanded capacities.  While some major retail chains and supermarkets have proven to be the exception to this rule, the majority of business entities have been focusing on long-term investments such as becoming more energy efficient, managing their IT equipment and infrastructure, and replacing older company cars with more reliable, newer models.

The agents’ findings include information that many businesses report a slight decline in retail sales and in the housing market during this year’s second quarter.

Many of the agents’ contacts felt that sentiment on the part of consumers had become soft, with shoppers beginning to reduce their spending in anticipation of the tax changes that many feel are imminent.  The agents also added that companies are still managing their overheads in an extremely tight manner, and that the demand for business services, while beginning to recover, has been very gradual.

The report stated that the BoE had gathered intelligence that the public sector had not only begun to economise on the costs inherent in its business practices but would continue to do so in the future.  There were also plans to curtail or reduce any discretionary spending.

Small business bank acounts reported that while credit availability had improved slightly in the first six months of the year, it still remained at very tight levels in comparison to those prior to the economic downturn.

BoE Agents commented that the individual experiences of small and medium-sized enterprises had been quite diverse.  In addition to SMEs, both the construction sector and  property development firms had faced marked difficulties in securing adequate business loans.

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