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What will happen if banks refuse to lend to small businesses?

Today saw the beginning of the bank reporting season with the top five banks in the UK expected to have made profits in the first half of 2010 in the region of £8 billion. However, there is growing concern about liquidity levels in the small business arena and the problems this will create in the medium to longer term and the impact this will have on the UK economic outlook.

There is no doubt that many of the small businesses of today have a large part to play in the UK economy in the short, medium and longer term. Not only are we putting the existence of small businesses act risk today, tomorrow and for the foreseeable future but the problem is that entrepreneurs will look elsewhere if the UK market is difficult. Despite the fact that the larger companies in the UK tend to grab headlines, the UK has historically had a very good track record with regards to small and medium-sized businesses.

If this was to change in the short to medium term this will have an impact upon the UK economy and the makeup of the government's income from business. It is in everybody's interest to encourage entrepreneurs and to assist small businesses where possible but whether UK banks are willing to take this "risk" at the moment remains to be seen.

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