Banks warn of lending squeeze

Businesses rather than consumers are likely to bear the brunt of the clampdown in bank lending, the Bank of England has warned.

According to its survey carried out during and after the stock market panic over sub-prime lending in the US and the problems of Northern Rock in the UK, banks have already imposed further restrictions on lending to companies.

Where banks are prepared to lend money it is likely to be at a higher rate of interest, the research suggested.

Companies are more susceptible than consumers to the kind of panic in the financial markets that has been witnessed in recent weeks.