A survey of 2000 small businesses shows that faced by banks not lending they are cutting costs by hiring cheap workers in the developing world via the internet.
The findings are released following the Bank of England’s announcement of a £4.8 billion fall in lending to businesses.
The survey found that there has been a 26.1% rise in small business hiring freelancers in India, 9.97% rise of hiring in Pakistan, 6.75% from Romania, a 4% rise in hiring from Bangladesh, and 3% rise in hiring from the Ukraine and the Philippines.
The survey found that with banks not lending to small businesses, business are turning to cheap workers across the developing to eek out what small investment resources they have.
The survey also found that 54% had applications for bank loans rejected. 56% said that reducing staff costs by hiring working in the developing world had also prevented them from going into debt after they were denied a bank load.
The impact of the negative decision was that:
- 20% has to borrow money from friends and family
- 42% had to use up their savings
- 10% had to use their overdraft facility
- 10% had to stop trading until they could find the money
- 20% said the essential investment to the business wasn’t undertaken
The survey also found that 48% said they would be investing in hiring freelancers to undertake work, saying that they only pay for services as they needed them
The survey was backed up by Freelancer.co.uk’s own growth figures, revealing that UK small businesses spending on freelancers has increased by 134% in the last few months.
“The data from the Bank of England today has shown that banks are still not willing to support small businesses, which are vital to the success of the UK economy,” said Matt Barrie, Freelancer.co.uk’s CEO.
“Many are having to borrow from friends and family, while many others are simply not investing and some are even closing down their businesses. As the Chancellor George Osborne admits that he won’t be able to meet his deficit reduction target, the banks and the Government should look again at how they can give support to the UK’s small businesses,” he said.
“Many small businesses are using what resources they have to hire freelancers to undertake work, cutting overheads and staff costs,” he said.