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MPs and contractors unhappy with bank lending

The Treasury select committee of MPs today said work needed to be done to address the worries of small businesses, who are having difficulty in securing bank lending.

The news corresponds with the results of the recent Civil Engineering Contractors’ Association (CECA) SME survey, carried out in April 2009, which showed that 47% of firms had experienced some difficulty accessing financial support from their banks since the start of the downturn and 58% of firms have reported that their banking costs had risen.

According to chairman of the Treasury select committee John McFall, “The extreme difficulties being faced by small businesses with regard to repaying and accessing loans was brought home starkly to us on our regional visits.

“There is clearly an unresolved inconsistency between, on the one hand, bankers’ assurances that they are increasing their lending and, on the other hand, widespread and clearly sincere complaints that credit is difficult to obtain and increasingly expensive.

“More comprehensive reports from the banks and Government on this matter would go some way to resolve this inconsistency.”

The CECA survey also revealed deep resentment of the way banks were treating customers in the civil engineering sector with many respondents showing dismay at current lending levels.

SME Contractors complained that public money provided as bail outs for the banks is not being passed on in lending to businesses and wanted the Banks supported by Government to provide funding at the same rate as before the crisis, not higher.

CECA director Rosemary Beales said: “Our Survey supports the Treasury Select Committee report which condemns the increase in banking costs and questions the success of the Government loan guarantee schemes.

“We know, as the Treasury Select Committee Report points out, that the schemes designed to get the Banks lending are not working well enough. Even though more than 60% of firms were aware of their availability, none had attempted to access funding through the Government’s Enterprise Finance Guarantee or Working Capital Guarantee.

“The banks need to start lending properly and support good business in the construction sector,” she said.

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