SMEs 'worst hit' by reduced lending

Small and medium-sized enterprises (SMEs) are bearing the brunt of contracted lending, the British Retail Consortium (BRC) has said.

The BRC's Credit Conditions Survey found that 33% of SME respondents had experienced reduced lending from their bank, compared to 18% of large businesses.

Some 89% said that limited access to credit has had a negative effect on their business, with 30% having had to reduce staff, and 75% to cut inventory levels.

The reduction of trade credit insurance was another concern for SMEs, with 50% of small suppliers saying that their payment terms had changed and 87% that insurers are not in a position to assess risk accurately.

The Government is expected in next week's Budget to unveil a guarantee scheme to protect supply-chain insurance, after concerns from manufacturers over a wide-spread reduction in credit cover.

Stephen Robertson, BRC director-general, said: "In these uncertain times, it's even more important [that] suppliers have the confidence that trade credit insurance brings. Cover must remain available.

"We're not expecting the tax payer to take on more risk than private insurers. But, by matching the trade credit insurance that private insurers are willing to provide, the Government can help fundamentally sound businesses weather the recession at relatively little cost."