December 15, 2010

Borrowing costs hinder small business growth

by Jan Harris

Bank lending fell by 4.5 per cent in 2010 according to the latest survey by the Centre for Economics and Business Research (CEBR).

The high cost of borrowing during the year deterred many small and medium sized businesses from seeking bank funding and the situation looks set to worsen when new EC banking laws push costs even higher.

The CEBR is calling on the UK government to reduce the corporate tax rate for small companies below the 20 per cent rate which comes into effect in spring next year to promote organic growth.

The study found that the 4.8 million UK companies with less than 250 employees outperformed the FTSE 100 in 2009, generating £1.6 trillion in annual turnover compared with £1.4 trillion generated by the FTSE 100.

Despite this, confidence among small business fell in 2010, at a faster rate than larger companies.

Delayed payments are a major problem for small businesses and the CEBR wants local authorities and large businesses to sign up to the Government’s ‘prompt payment code’, which is a promise to pay suppliers on time.

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