Research by Allica Bank reveals a £90 billion 'lending gap' in the UK's banking system that restricts investment and economic growth for SMEs. Over the past four decades, lending to small and medium-sized enterprises has significantly fallen. The emphasis on low-risk lending tied to property has left many service-oriented businesses with limited access to funds. Additionally, the collapse of overdrafts reflects a shift in lending styles, compounding the problem. As SMEs face mounting pressures, many prefer slower growth over availing loans, indicating a detrimental cycle for the economy.
SME lending today is £90 billion lower than if maintained levels from 1997-2004, significantly curtailing investment, productivity, and economic growth.
The shift towards low-risk lending practices has left service-based businesses without collateral struggling to access vital funds needed for growth.
A Bank of England survey indicates that 77% of SMEs would rather accept slower growth than take on borrowing, attributed to an unresponsive finance market.
The collapse in overdraft provision signifies a broader trend, as lending becomes concentrated on secured loans, limiting options for modern SMEs.
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