Business credit conditions in the UK are still getting worse the Bank of England has warned. Banks are being much more proactive in trying to call in their outstanding debts from UK companies. New loans for companies are much harder to get, and those companies that are managing to get new loans are paying much more for them.

A knock-on effect of the current climate is that companies are much less willing to provide credit accounts for their clients in their supply chains.

The Bank of England’s regional network of agents has agreed that credit conditions for British companies have definitely tightened in the last month. The agents surveyed companies during April and May and according to their summary of business conditions they state that companies are “being actively encouraged to pay off outstanding loans”, they are also complaining about the level of fees they are being charged for overdraft facilities.

Christopher Shaw who is chief executive of Platform Black, an alternative finance company said that banks are unwilling to lend money to firms except for those who are extremely low risk.

He said: “There’s a real danger that this will have a chilling effect on the economy, even before the recovery has taken root.”

“For the economy to start growing in earnest, businesses need to grow and to grow they need funds. Currently, those funds simply aren’t there. The engine of the economy needs fuel but it’s simply not getting it.”