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Cautious SMEs beginning to invest as economic outlook improves

POSTED: 15th October 2013
IN: Business news
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The Bank of England's latest Credit Conditions survey has revealed encouraging signs that after a long period of hesitance, SMEs are beginning to seek investment finance as prospects strengthen for the economy.

While Aldermore's SME Inflation Index showed growing SME confidence was failing to translate into investment intentions across Q2, the Bank of England report suggests the situation in the later portion of Q3 is starting to change. Demand for credit from the SME sector rose in third quarter, driven particularly by capital investment and commercial real estate activity, which saw the largest rises since the inception of the survey in 2007.

"Small firms are beginning to feel confident in their outlook and there are increasing signs of the economy picking-up pace," stated John Allan, National Chairman of the Federation of Small Businesses, in response to the news.

Positively, this appetite for credit was also met by some improvements in supply, with a slightly higher proportion of approvals for small business loan applications compared to the previous three months. This finding caused John Cridland, Director-General of the CBI, to comment:

"Business confidence appears to have reached a tipping point and is beginning to translate into greater demand from firms for finance to invest, and its good news that the overall availability of bank finance has increased to support this."

As a further welcome development for the nation's small business community, the BoE report also outlined that lenders expect both credit demand and loan approval rates to continue to increase over the fourth quarter as the economy gains momentum.

"Credit demand from small businesses will rise as they start to see increased trade, thus leading to new opportunities to employ, export and invest," confirmed the FSB's John Allan, adding, "The key now is to continue with measures to help start-ups and small firms actually access the funds they need." While these signals that the SME sector is regaining health are undoubtedly a step in the right direction, it is important that government and the financial sector continue to build on this initial progress to give SMEs every opportunity to grow.

While these signals that the SME sector is regaining health are undoubtedly a step in the right direction, it is important that government and the financial sector continue to build on this initial progress to give SMEs every opportunity to grow. 

As a mark of the Bank's continuing commitment to these vital members of the UK economy, Aldermore will be taking part in Small Business Saturday this December, encouraging the public to support their local SMEs. You can read more about the Bank's involvement with the scheme here.

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