CBI warns of harsh winter for small biz
Prising cash out of the banks
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Business group the Confederation of British Industry (CBI) called on banks to free up lending to small and medium enterprises this winter, warning that many firms will be looking for funding.
John Cridland, deputy director-general of the CBI, said businesses would be forced to cut jobs and investment if banks did not free up access to credit.
He told the Commons' Business and Enterprise Committee that the relationship between banks and business had suffered because of the credit crunch and that banks remained suspicious of lending to businesses. The government promised to encourage banks to open access to credit to business as part of its bail out package but never made clear how this would happen.
The CBI is calling for a one per cent cut in interest rates today.
Cridland said: "We have talked to businesses of all shapes and sizes across the UK, and the need for a further rate cut is clear. The recession into 2009 will be both longer and deeper than expected, and we need the strong medicine of a full percentage point cut."
The Federation of Small Businesses told the same Committee that banks were still failing to deal properly with smaller firms. The FSB welcomed the recent pledge of £4bn in support for SMEs from the European Investment Bank but remained concerned that funding - which will come through the banks - was not available now. A third of FSB members complained that credit is now less available and another third said existing credit had got more expensive in the last two months.
The FSB is also calling for a one per cent cut in interest rates to 3.5 per cent. The TUC wants a cut of 1.5 per cent.
The Bank of England monetary Policy Committee meets later today. ®
COMMENTS
government banks
Since our government owns a couple of banks now, cant they do the cut rate thing and therefore out compete the other banks that are being tight at the moment ?
.. silly me that would be both sensible and in the interests of the voter... not something the UK government has caught onto yet..
Well it is harsh all over
It depends how a business big, medium or small is financially structured.
Most of them have been given to bad management, that either fails to see the whole of the endeavour whilst not accounting as a cost centre, or quite simply they have made the school girl error of assuming that interest rates would remain low and the availability of credit would flow forever.
Frankly it is just bad management that is rife throughout the entire UK, it is hilarious. Still, the banks will open their coffers, and they will want collateral, that will mean stock or property holdings. Now property is what most of the small businesses have, and it is dropping away like crazy, so it might be prudent to value at today prices and stake your house or premises, but you will have to restructure after a move like that. Stock, well the banks will value that low, so you may end up having to shift a few seasons for the bank's enjoyment.
See they never lose, even when they do lose, they get bailed out, absolutely ridiculous, but there you go the banks will march in and grab some useful assets right now, at bargain prices, and everyone will have to work that little bit harder to get a crumb on the table, well everyone apart from the bankers.
If you are going to grow a business, you either need investors, and there are quite a few looking for deals at the moment, or your own cash, and a shed load of expertise that is realistic, not based in cloud cuckoo land. The credit will come back, and the bubble will be bigger than ever the next time, but it will be a few years, the market wants realism at the moment, well it always do. But of course most spiral between elation and depression, so the pessimists are about to take a beating now.
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