U.K. Banks Reject 57 percent of Firms Loan Requests, Lobby Group Says

U.K. banks rejected 57 percent of companies’ requests for credit last year, forcing some to turn to credit cards for financing, according to a survey by the Institute of Directors, an employers’ lobby group.

The findings, which will be submitted to the government, contradict claims by banks that they are meeting the majority of demand for loans, the Institute said today in a statement. This is the first time the Institute collected data on the scarcity of credit, said spokesman Alistair Tebbit.

Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc, the two biggest banks bailed out by the U.K. government, have failed to meet legally binding pledges to increase lending, lawmakers said in a report last week. Banks say the lending slowdown is largely the result of a drop in demand, a consequence of the recession.

“The nationalized and semi-nationalized banks owe their existence to us, the taxpayer, and they must make good on their commitments to increase lending at reasonable rates,” Liberal Democrat Treasury spokesman Vince Cable said in response to the Institute of Directors’ figures.

The shortage of credit forced some companies to turn to unsecured loans, the survey found. About 20 percent turned to credit cards for some portion of their funding in the past year, as those who received bank loans dropped to 28 percent from 45 percent in 2001 and the portion accessing overdrafts fell to 36 percent from 40 percent, the Institute said.

The Institute surveyed 1,045 company directors in December, with a quarter saying they had applied for bank loans in the past year. Of those, 57 percent were rejected, the survey found.

Source: http://www.businessweek.com/news/