UK SMEs cut staff and output as a direct result of a worsening credit crunch according to the latest CBI report.
Despite all the pressures being placed on the banks, small businesses are still struggling with both the cost and availability of finance, according to a report released today by the Confederation of British Industry (CBI).
The CBI’s Access To Finance Survey claims that 60% of small and medium-sized businesses have reported an increase in the cost of new finance.
Banks are shifting to offering loans products based off a LIBOR rate, rather than bank base rate which is partly to blame for the rise in the price of borrowing.
Well over half of the SMEs surveyed (57%) said they had already cut back on capital investment as a direct result of the credit crunch.
Staff cuts had been implemented by 27% and output reduced by 32%.
Ian McCafferty, the CBI’s Chief Economic Adviser said:
This survey clearly shows that obtaining investment capital is most challenging and that the credit crunch is affecting firms’ ability to operate. It is not surprising that some firms have started taking pre-emptive action to safeguard their longer-term future.
These figures should be considered, however, with some caution. Only 134 firms of all sizes responded to the CBI survey, which is well below statistical validity, particularly when this sample is divided into SME, large and corporate business segments, as it is.
Nevertheless, these data do reflect the anecdotal sentiment and more rigorous data found in other surveys reported over the last few months.
[Picture credit: stuartpilbrow licenced from Flickr]
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