Banks still not lending to small firms

The Big Innovation Centresaid innovative SMEs - the ones most likely to create jobs and growth – are also more likely to encounter problems than non-innovative small firms.

The Big Innovation Centresurveyed more than 11,000 SMEs.

Its report shows that out of all SMEs seeking finance in 2010/12, over half had difficulties finding it, while one in four did not receive any funding at all.

Both figures are roughly double the rates of 2007/8.

Report author Dr Neil Lee said: “The future growth of the UK economy depends on investment in new products and services.

“Yet it is harder for innovative small firms to obtain finance than their peers. A lack of finance for the firms which need it most will be a long-term drag on the UK economy.

“Without action from policymakers, banks are unlikely to change their lending behaviour.”

Another separate report published today shows a “long-term disconnect between capital raised by banks and investment in innovative activities – those most likely to create jobs and growth”.

Author of the report Hiba Sameen said: “We would like to see government redoubling their efforts around finance for SMEs, particular those most likely to boost jobs and growth.

“The British Business Bank is taking steps in the right direction by promoting alternative sources of finance for SMEs, but its current scope and scale are too small to make a big difference in the finance gap for SMEs.

“The government needs to increase its scale by dedicating more capital to the bank, and also increase its scope by facilitating access to public corporate bond markets for SMEs."