Business sees tighter credit squeeze: survey

LONDON (AFP) — Businesses feel the credit squeeze is tightening and conditions will worsen without action by the government, a new survey of lending to industry found on Monday.

The Confederation of British Industry, the main body representing employers, has set up a new survey called "Access to Finance" to monitor the flow of credit to businesses.

It found that 63 percent of businesses believed that their access to credit had worsened in the last three months, and that 59 percent of them expected the squeeze to get tighter in the next few months.

Among big businesses surveyed, 82 percent said that their access to credit had become more difficult in the last three months and 94 percent of those which negotiated new credit reported that the interest rates charged had risen.

Among smaller firms, 60 percent of those seeking new credit reported a rise in the charge.

The survey also showed that 37 percent of businesses had cut jobs in the last three months because of problems connected with the availability of credit, and that they continued to encounter problems in insuring trade.

The director general of the CBI, Richard Lambert, said: "We have urged the government to move as quickly as possible to set out when the various support packages to tackle the credit crunch will come into effect, and to implement them quickly."

The British government, in common with governments and central banks in other leading industrialised countries, has launched crisis measures not only to relieve the financial sector of some of its most crippling problems, but also to ensure that banks continue to lend to businesses on normal terms.

These measures are part of wide-ranging programmes to combat the economic downturn caused by the financial crisis and prevent recession from turning into depression.

In the last quarter of last year, the economy contracted by 1.5 percent to mark the sharpest slowdown since 1980.

The survey of 131 businesses was carried out between January 14 and 22.

"This survey clearly shows that obtaining investment capital is the most challenging and that the credit crunch is affecting firms' ability to operate," the CBI's chief economic adviser Ian McCafferty commented.

-- Dow Jones Newswires contributed to this report --