CBI: credit squeeze eases

Businesses are finding it easier to obtain new credit for the first time this year, and expect the situation to improve at a similar rate over the coming three months, the CBI said today.

However, the business organisation's latest Access to Finance Survey also showed the cost of finance has continued to rise, and there has been another marked deterioration in the availability of trade credit insurance.

Of those firms seeking new credit lines in the past three months, 27% said that availability had improved, while 10% said it had worsened. The resulting rounded balance of 18% stands in contrast to May's deterioration (-20%), and is the first improvement in credit supply since the survey began in January.

This improvement was mainly driven by the very largest firms with over 5,000 employees, who saw a strong rise in new credit availability over the past three months, following much more difficult credit access at the start of the year.

The supply of existing credit was broadly flat, with a balance of 2% reporting better availability over the past three months, marking an improvement on May (-10%). Firms expect conditions for existing credit to remain broadly similar over the coming three months, while the availability of new credit is expected to continue improving at a similar rate to the past quarter.

However, small and medium sized enterprises (SME) saw a moderate decline in the availability of existing credit lines (a balance of -12%) and expect a similar tightening over the next three months. While the supply of new credit improved slightly (+8%), firms predict it will remain flat in the coming three months.

Richard Lambert, CBI Director-General, said: "Credit availability had been getting more difficult for many months, so today’s results are positive news. The improvement in access to new credit will help many businesses struggling with the recession, and it is encouraging that its supply is expected to improve in the months ahead.

"Smaller and medium sized businesses are still facing challenging credit conditions and have fewer funding options open to them than big companies. We hope that over time their credit supply will improve."

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