Withdrawal of bank lending to wholesalers could drive up retail prices
Latest figures show banks withdrew £409m in lending to wholesalers in June and July causing concern that a ‘Brexit crunch’ is hitting some sectors of the economy, said Funding Options, the online business finance supermarket.
Funding Options said that this cut in lending could cause significant financial problems for wholesalers and drive up prices for retailers and consumers.
Difficulty accessing bank funding could lead to a rapid reduction in the volume of imports by wholesalers and force up prices for the goods that are on sale. The problem is exacerbated by wholesalers having to bear the brunt of the fall in the value of sterling as the goods they import cost more to buy.
Following the Brexit result on 23 June, the pound fell below its lowest level in over 30 years to $1.31.
Funding Options said that while banks are reducing their lending, alternative finance providers are stepping in to cover the funding gap and help smooth cash flow.
Conrad Ford, CEO of fundingoptions.com, said:
“Wholesalers importing goods for resale are feeling the sharp end of the fall in sterling, just as their need for finance increases they are finding banks walking away.
“Wholesalers are not always perceived as the most essential sector of the economy but they play a vital part in supporting small businesses, especially shops and restaurants.
“Margins for wholesalers are already very slim and most tend to have a lot of capital tied up in stock.
“Financial difficulties suffered by wholesalers cause problems up and down supply chains – this disruption makes it more likely that consumers will bear extra costs.
“While the banks reduce lending due to Brexit alternative finance is an excellent option for wholesalers and other businesses who are facing financial instability. Wholesalers are able to rely on alternative finance providers to support them through any jitters the UK economy may continue to see.
“Funding Options can help companies find the right alternative finance providers for them to help with the extra costs that they may face.”
