Big Drop in Bank Lending
UK banks are now protecting themselves by decreasing the amount and of lending to professional service firms. The banks are not only reducing amount but are also reducing the number of firms to which they are lending money. This report was provided by independent financial provider.
The calculations of Syscap clearly showed that the outstanding loans to accountancy firms have been dropped from £35.5bn to £32bn which is approximately a decrease of 9.7%.
Syscap also said that the reduction in bank lending will create problem for many professional service firms and they might face cash flow problems. Those firms will now surely look for short-term funding to pay tax and short-term debts.
Philip White, chief executive of Syscap said that UK banks are facing this bank lending problem because of the banking crisis otherwise there were many banks 3 years ago who were willing to lend money to accountancy firms but unfortunately now some of those banks either don’t exist or are hesitant to lend money.
Because of the bank lending crisis, some professional services groups faced insolvency. Some of them are Vantis, top 50 law firm Halliwells and management consultancy Marakon.
Banks are obviously playing defensive because of the collapses of high profile firms are becoming more and more hesitant to lend the money. This is causing huge problems for many firms and most of them are now moving to the cost-cutting mode in order to avoid collapse and stay alive till the bank lending crisis is over or they can arrange funds from other source.