Hostname: page-component-586b7cd67f-t7czq Total loading time: 0 Render date: 2024-11-29T11:59:56.775Z Has data issue: false hasContentIssue false
  • English
  • Français

An Assessment of Bank Lending to UK SMEs in the wake of the crisis

Published online by Cambridge University Press:  26 March 2020

Angus Armstrong ,
E. Philip Davis ,
Iana Liadze  and
Cinzia Rienzo
Cinzia Rienzo
Affiliation:
NIESR
Get access Rights & Permissions [Opens in a new window]

Abstract

The availability of bank finance to small and medium sized enterprises (SMEs) is important to allow SMEs to start up and finance investment for growth. To assess changes in such availability over 2001–12, we used data from a series of surveys that provide detailed information on the characteristics of a sample of UK SMEs, their owners and experiences of obtaining finance. Using econometric models, which included controls for SME characteristics and risk factors, indicators of changes in the provision of bank lending over the time period abstracting from borrower risk could be obtained. The results suggest ongoing restrictions on the availability of SME bank finance up to 2012 – which appear to have persisted into 2013. Further research using macro data shows an impact of economic uncertainty on such finance. If unresolved, these patterns could imply adverse effects on economic performance in the short and long term.

Keywords

small and medium enterprisesbank lendingcredit supplybanking crisisE44G01
Type
Research Articles
Information
National Institute Economic Review , Volume 225 , August 2013 , pp. R39 - R51
Copyright
Copyright © 2013 National Institute of Economic and Social Research

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

This paper summarises a project prepared by NIESR for the Department of Business, Innovation and Skills. We gratefully acknowledge assistance from Stuart Fraser of Warwick Business School, advice from colleagues at BIS and suggestions from participants in seminars at BIS and NIESR.

References

Agur, I. (2013), ‘Wholesale bank funding, capital requirements and credit rationing’, IMF Working Paper No WP/13/30.CrossRefGoogle Scholar
Armstrong, A., Davis, E.P., Liadze, I. and Rienzo, C. (2013), ‘Evaluating changes in bank lending to UK SMEs over 2001–12 – ongoing tight credit?’, NIESR Discussion Paper No. 408 and UK Department of Business, Innovation and Skills Paper BIS/13/857.Google Scholar
Barrell, R., Davis, E.P., Fic, T., Holland, D., Kirby, S. and Liadze, I. (2009), ‘Optimal regulation of bank capital and liquidity: how to calibrate new international standards’, FSA Occasional Paper No. 38.Google Scholar
Baum, C.F., Caglayan, M. and Ozkan, N. (2002), ‘The impact of macroeconomic uncertainty on bank lending behaviour’, University of Liverpool Working Paper.Google Scholar
BDRC (2012), ‘SME finance monitor Q1 2012’, BDRC Continental.Google Scholar
Bester, H. (1985), ‘Screenings vs. rationing in credit markets with imperfect information’, American Economic Review, 75, pp. 850–5.Google Scholar
Byrne, J. and Davis, E.P. (2005), ‘Investment and uncertainty in the G-7’, Weltwirtschaftliches Archiv, 141/1.Google Scholar
Campello, M., Graham, J. and Harvey, C. (2010), ‘The real effects of financial constraints, evidence from a financial crisis’, Journal of Financial Economics, 97, pp. 470–87.CrossRefGoogle Scholar
Davis, E.P. (1991), ‘Bank credit risk’, Bank of England Working paper No. 1.Google Scholar
Davis, E.P. (2001), ‘Multiple avenues of intermediation, corporate finance and financial stability’, IMF Working Paper 01/115.CrossRefGoogle Scholar
Davis, E.P. and Liadze, I. (2012), ‘Modelling and simulating the banking sectors of the US, Germany and the UK’, NIESR Discussion paper no. 396.Google Scholar
Department of Business, Innovation and Skills (2012), Business Population Estimates for the UK and Regions 2012, London, BIS.Google Scholar
Fraser, S. (2012a), The Impact of the Financial Crisis on Bank Lending to SMEs, Report prepared for the BIS/Breedon Review.Google Scholar
Fraser, S. (2012b), ‘Are entrepreneurs financially constrained? A new test based on finance gaps’, CSME Working paper.Google Scholar
Holton, S., Lawless, M., McCann, F. (2012), ‘Credit demand, supply and conditions a tale of three crises’, Central Bank of Ireland working paper.Google Scholar
Stiglitz, J.E. and Weiss, A.M. (1981), ‘Credit rationing in markets with incomplete information’, American Economic Review, 71, pp. 393–410.Google Scholar
Stiglitz, J.E. and Weiss, A.M. (1986), ‘Credit rationing and collateral’, in Edwards, J. et al. (eds), Recent Developments in Corporate Finance, Cambridge University Press.Google Scholar
Wooldridge, J. (2006), Introductory Econometrics, A Modern Approach, 3rd edition, Thomson.Google Scholar