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Squeeze on credit set to intensify

Credit conditions for business are set to tighten further with small to medium sized enterprises (SMEs) feeling the squeeze more, the Bank of England has warned.

 

The latest results from the Bank of England’s quarterly Credit Conditions survey revealed that corporate credit availability had reduced over the last quarter, and was set to reduce only slightly over the coming quarter.

 

Many lending institutions, however, said they had also cut the availability of their full range of financial services to SMEs. Many said they expected to see a further reduction in secured credit activity to these businesses over the next three months as the crisis in the financial markets and fears over the health of the economy became more pronounced.

 

Over two fifths (42 per cent) of respondents said they expected to reduce access to credit further against just over a quarter in the last survey, published at the beginning of this year.

 

A number of financial institutions and non bank lenders were polled for the 2008 Q1 Credit Conditions survey, conducted between February 25 and March 19. Lenders were asked about the past three months and the coming three months.