What happened to all the business accounts?

OK, so Mandie’s launched his rescue plan today for small business. Wherever you are, a small electrical engineering unit in Wigan, a modest car parts manufacturer in the Midlands or you have a textile business in the East End of London – if you can get credit in the near future, it might just be because of Lord Mandelson’s plan.
The scheme will hopefully generate £20bn of short-term loans, for businesses turning over up to £500m and a further £1.3bn for businesses up to £25m in income.
Not sure I quite understand that bracketing. Seems to imply there’s much less cash being made available for the small enterprises – which doesn’t exactly sound like the brightest thing to do on the face of it.
But overall, the plans seems to promise a healthy injection of credit at a time when it was needed. Even the Tories couldn’t muster much criticism except to say it copied them which is to say ‘good idea’ in other language.
The seems significant. The British Banker’s Association’s (BBA) last figures showed the number of businesses opening accounts had slowed significantly while overdraft lending and the rate of term lending were falling away. Either people weren’t asking for money (difficult to imagine) or they were being told they couldn’t have it (much plausible given the anecdotal evidence coming in to Accountancy Age).
But I find one particular statistic fascinating. That’s the rolling total of small business new to banking. In September ’07 it was 585,000. By September last year it was 538,000. A fall of 47,000. What on earth happened to all those businesses? It sort of illustrates the carnage out there.

he BBA however, attempted manfully to put some gloss on it all:
‘Lending to small businesses is at a higher level than at end-2007 and term lending continues to grow month on month. Deposit levels also remain high and, as we would expect from experience of previous economic downturns, loan demand is slowing and small businesses are using their cash flows for working capital, rather than seeking credit options. Nevertheless, over 40,000 small businesses a month are establishing new banking relationships with high street banks.’

You have to wonder what was going through their heads.

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