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Self-employed contractors deterred from making loan applications

By: Paul Towndrow

Posted On: Apr 5th, 2011  Under: Contractor Money, Freelance Contractors, Contractor Limited Company, Sole Trader

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Many amongst the UK’s self-employed small business owners, including limited company contractors, appear to have been forced into a round of severe belt-tightening during the first quarter of 2011, according to the Bank of England’s latest Credit Conditions Survey.  There has been a sharp decline in the demand for loans amongst smaller enterprises over this period, the figures reveal.

Worries about the effects of the Coalition’s spending cuts appear to have played a role in the decrease, along with seasonal weather-related factors.  Lenders expect credit applications from firms with turnovers of below £1 million a year to rise over the coming three months, but activity remained stubbornly flat between January and March.

Commenting on the survey, British Chambers of Commerce (BCC) Chief Economist David Kern said that the findings are an indication of the “difficult circumstances facing the UK economy in the first quarter of the year and the pressures facing small businesses, especially smaller firms.” Credit availability has increased ‘a little’ in the first quarter, he said, but the proportion offered to SMEs has remained unchanged even so.

Such inadequate credit growth reflects a lack of demand, according to Mr Kern, and to compound matters, spreads on lending to smaller firms have increased, squeezing their profits in the process. In a thinly veiled comment to the Chancellor, he went on to say that the Bank of England’s survey highlights the still-present risks to recovery faced by the UK’s economy and the importance of “making every effort to support growth, particularly for smaller firms.”

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