Small businesses feeling the credit crunch

7 October 2008

The results of a new poll of small firms have been sent to the Bank of England in the hope it prompts an immediate cut in interest rates.

The snap survey, carried out by the Federation of Small Businesses (FSB), found that the credit crunch and the economic slowdown are having a profound effect on the small business sector.

Of the respondents, more than four in five reported that their costs had increased in the last year.

Some 46 per cent said that they had suffered a decrease in trade.

On the question of business finance, such as loans and overdrafts, 40 per cent had experienced increases in the cost of borrowing from the clearing banks.

Over half (51 per cent) have had to deal with customers extending the length of time it takes to pay invoices, reflecting concerns, the FSB said, that large companies are improving their cash flow on the back of their smaller suppliers.

John Wright, the FSB’s national chairman, commented: “These startling figures show that the credit crunch is trickling through to the small business sector. In these tough times it is proving increasingly harder for small businesses to rely on their savings and that is why it is so important for banks to be more willing to lend money and for larger firms to settle invoices on time.”

Mr Wright added: “Small business survival is integral to the wellbeing of the British economy. That is why a cut in interest rates by the Bank of England is crucial. The Bank must set aside worries about inflation and look to giving the economy a vital boost.”