Bid to stimulate economy 'failed'

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The Federation of Small Businesses said a survey of thousands of companies found that moves aimed at guaranteeing bank lending and boost consumer spending was having "no impact."

The poll of 4,000 small firms showed that over half had seen their trade decrease in the last two months even though VAT was cut by 2.5% at the end of last year.

Only one in 12 of those questioned said their banks were making available the Government-backed Enterprise Finance Guarantee and over half voiced doubts that that scheme would compel banks to start lending again.

A fifth of small companies said they were still waiting longer than 10 days to be paid for public sector work and a third were waiting longer to get money from private firms. A separate survey of 5,000 businesses found that the VAT cut from 17.5% to 15% had made "no impact" on their trade.

FSB chairman John Wright said: "These startling figures show there is still more to be done by Government and the banks to ensure businesses can survive in this economic climate.

"Small businesses are doing all they can to survive the recession but they need better support from the Government, the banks, and the public and private sector.

"The Government must use its meetings with the banks to monitor the guarantee scheme and assess why loans are still being refused, while both Government and bank branch managers must do more to promote these funds.

"The FSB was pleased to see the introduction of the Prompt Payment Code but we now need more action to tackle late payments. We would like to see Companies House given sufficient power to penalise late payers in the commercial world while the Government must do more to ensure the public sector does its bit to help the economy.

"The small business sector is a vital source of employment and turnover for the UK economy, especially during these tough times. But these figures show that there is still an avalanche of stumbling blocks stopping this vital sector from surviving and recovering."