Companies are finding it easier to secure debt finance, according to the latest CBI Access to Finance survey – the first time a positive result has been recorded since the report began at the start of the year, but small firms are still suffering.
The survey by the business lobby group found that among firms which sought new credit lines over the past quarter, 27% reported that availability had improved, while 10% said it had deteriorated. The corresponding net balance of 18% represented a marked improvement from May's balance of -20%.
The results follow last week’s announcement from the Bank of England that it will up its efforts to improve the flow of money through the economy by raising its quantitative easing programme by £50bn, to £175bn. It cited poor credit conditions as one of the reasons for the move.
The CBI noted the dramatic turnaround in its latest survey could largely be attributed to reports from firms with more than 5,000 employees, which saw a marked improvement in credit availability.
Small and medium-sized businesses continued to see their fortunes suffer during the same period, as they experienced a slight decline in the availability of existing credit lines, resulting in a net balance of -12%. Small firms also expect more tightening in the coming months.
The findings are consistent with the recent Bank of England benchmark credit conditions survey, which found that the tightness of credit markets may have levelled off in recent months.
CBI director general Richard Lambert said: "Credit availability had been getting more difficult for many months, so today's results are positive news. The improvement in access to new credit will help many businesses struggling with the recession, and it is encouraging that its supply is expected to improve in the months ahead.
"Smaller and medium-sized businesses are still facing challenging credit conditions and have fewer funding options open to them than big companies. We hope that over time their credit supply will improve."
Lambert also stressed that some firms are struggling with trade credit insurance, despite a Government plan to try to support the market.
© Crimson Business Ltd. 2009