The economic impact of the small firm credit crunch

I’ve been impressed by the Daily Mail’s campaign highlighting the credit squeeze on small and medium size businesses. Popular journalism at its best: clear, passionate and firmly in the broad public interest. The paper should make more of this work in its submissions to Lord Leveson’s inquiry into the press.

This morning the Mail continues to hammer away, putting Sir Mervyn King’s words on Wednesday about the continued credit squeeze on small firms on the front page (right).

But, actually, the Governor of Bank of England and the Mail are not singing from precisely the same hymn book on this.

The Mail says small “firms are being starved of the funds they need to grow, create jobs and drive the economic recovery”. And its editorial today warns that “the only way out of Britain’s economic difficulties is to help private business [including SMEs] grow”.

Yet Sir Mervyn’s comments at this week’s press conference suggest he does not regard easing the flow of credit for small businesses as essential for the wider economic picture:

“It’s pretty obvious that net lending by banks to businesses as a whole has fallen quarter by quarter through 2011. Now we don’t think this is a major issue for large businesses, and therefore really for the level of investment in the UK, which is dominated by big businesses.”

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