New figures released by Eurostat last week have painted a bleak picture of the state of small business financing in the UK. The figures (PDF link) show that between 2007 and 2010 as the recession began to bite, the number of failed SME loan applications quadrupled from 5.6% of all applications to 20.8%.
The number of partially successful applications also more than doubled from 6.1% to 14.7% – all in all the number of successful loan applications from small and medium-sized businesses in the UK tumbled from 88.4% to 64.6%.
This huge loss of confidence in the nation’s small business was hardly a British phenomenon – the figures for the rest of Europe are similarly depressing, with the number of failed applications rising by a factor of ten in Bulgaria, and leaping from 1% to 26.6% in Ireland.
The timeframe of the figures ends shortly before the introduction of Project Merlin, the Government’s agreement with the UK’s biggest banks to help get credit into the hands of small businesses. Although the Project Merlin banks missed their targets in the first quarter, performance improved in the subsequent three months, perhaps pointing to an increase in confidence amongst those seeking credit.
When the figures for the following twelve months are released we are likely to see a slight uptick in lending, however the availability of credit may well slump again following the recent Eurozone crisis – particularly in countries whose economies are in worse shape such as Greece and Ireland.
Photo by Sean MacEntee - CC
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