Availability of credit a matter of life and death for small business

Bank of England governor Mervyn King gives evidence to MPs. Small businesses need his help. Photograph: PA

Bank of England governor Mervyn King drew attention to the plight of individual small firms that find it hard to borrow at the Treasury select committee today, though he also mentioned research showing that their difficulties had not held up past recoveries, because most investment is done by large firms.

I’m not sure he’s right to be sanguine on the latter point. It is not just a question of investment: the availability of credit can be a matter of life and death for a small enterprise.

The public sector and many large firms are shedding jobs by the thousands, and we are relying on smaller businesses, particularly in innovative sectors such as green technology, to create new ones. Without bank support, they won’t be in a position to hire. If Santander and the new banks actually manage to get more credit flowing to small firms over the next few years, they will be performing a great service to the economy.

Source : guardian-business
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