Fall In Successful Loan Applications

There has been a decline in the percentage of success rates of businesses applying for loans from banks. In 2007 90% of loan applications to banks were successful but in 2010 there was a fall to 65% of successful loan applications. The percentage of SMEs looking for finance increased from 35% in 2007 to 42% in 2010. A majority of three quarters of businesses went to banks when looking for loans and five out of six businesses expect to apply to banks when looking for loans in future.

The main reason for refusal of loan finance was given as a lack of collateral or a lack of own capital. Poor credit rating became the most notable reason among other lenders in 2010 whereas in 2007 reasons were more sparse. In the few cases where the failure to get finance was becuase of a refusal on the part of the applicant high interest rates were less of a problem in 2010 than in 2007. This is partly due to the fact that in 2007 the Bank of England base rate was over 5% but in 2010 the base rate was held at 0.5%.

The economic outlook was given as the main limiting factor for business growth. Price competition and small margins were also among the main reasons given along with limited demand in domestic markets.

Decreases In Distribution And Production Investment

Business investment statistics are estimated to show a decrease of 5.5% compared with the previous quarter and 6.8% with this time last year according to the Office for National Statistics. The decreases were estimated to have been in distributions services and production. Capital expenditure was also reduced in the real estate and renting, communications and hotels anf restaurants categories. The business investment figure for the first quarter of 2009 is estimated to have been £33,042 million. It was £34,952 in Q4 2008 and it has fallen from £35,771 in Q2 2008. Services account for £24,605 a fall for the 5th successive quarter from £27,149 in Q4 2007.

Low Production Figures But Non-Durables Up

The index of production for the first quarter saw a 5.3% decrease quarter on quarter and 12.1% decrease on the first quarter of 2008. Manufacturing was 5.5% lower and electricity, gas and water decreased 3.5% on the previous quarter. Manufacturing also showed the lowest rate of decline for 13 consecutive months with a 0.1% decrease between February and March. The March index was 88.0.

In the main industrial groups output of durable goods fell 8.0% on previous quarter, consumer non-durable goods went up 0.3% on February, capital itmes were 8.9% lower and intermediate goods and energy 6.6% lower than last quarter. Other significant falls included machinery and equipment.