July saw a £200m drop in small business borrowing from the previous month, according to new figures from the Bank of England.
The figures show that the annual growth rate of SMEs in the UK has slowed to 0.7 per cent. Meanwhile lending to larger businesses, defined as those with an annual debit account turnover on the main business account of £25m or over, increased to £8.2bn. This represents an uptick in the annual growth rate to 6.3 per cent.
Commenting on the figures, Mike Cherry, Federation of Small Businesses (FSB) chairman, said: “Small businesses appetite for new finance is waning against a backdrop of unprecedented uncertainty, anaemic domestic growth and inflationary pressure weighing on consumer demand.
“Investment intentions are not where they should be and firms will only seek growth finance again when they have a clearer sense of what the future holds.”
Cherry believes the UK is starting to experience a convergence of factors that could threaten small business access to finance across the country, including lack of access to the European Investment Fund and the closure of the Funding for Lending Scheme in January.
He also highlighted the importance of setting the right support in place for businesses post-Brexit as the uncertainty of funding options for small businesses in the UK could be damaging.
“A botched withdrawal from the EIF would mean a significant shock to small business finance markets. We need to see its replacement finalised sooner rather than later,” he continued.
“It is crucial that negotiations with the EU 27 on the UK’s exit are productive and guided by economic rationality on both sides. In particular businesses urgently need clarity and certainty on the nature and length of transitional arrangements once we have left the EU.”