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British businesses struggle to get finance

NEARLY half of British companies had trouble getting access to new finance at the end of last year and the same proportion expect conditions to get worse as the credit crunch tightens its grip.

Banks have choked off lending to companies to shore up their balance sheets amid a global shortage of capital, forcing many companies to lay off workers and slash investment, according to a survey by the Confederation ofBritish Industry.

The survey showed that 47 percent of companies seeking new credit in the three months to January reported less finance available. The same proportion feared that it would become even more difficult to secure financing in the next three months. "Day by day, constrained credit is damaging our economy," said CBI Director General Richard Lambert, launching the monthly survey.

The lobby group reckons that large firms will need to refinance over 100 billion pounds (US$147 billion) of credit in the next year, and urged the government to quickly implement measures it announced last month to get credit flowing again.

On Friday, the Bank of England said that it would launch a 50-billion-pound scheme to buy up commercial paper, with the aim of freeing up market conditions.

The bank has slashed borrowing costs to a record low of 1 percent to shore up the economy and kick-start lending - a reduction of 4 percentage points since October - but nearly half of the companies polled said the cost of borrowing had risen over the past three months.

Problems obtaining credit have driven more than a third of companies to lay off staff in the past three months.


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