Rising borrowing costs for small businesses fuel fears of market-led recession

Banks feeling the pinch of the liquidity freeze are hiking borrowing costs for SMEs in the UK, with potentially damaging effects for the wider economy, warns the Federation of Small Businesses

There is growing concern that a market-led recession could follow the crisis in the money markets as small businesses report rising borrowing costs. Banks hit by the liquidity squeeze are being much more cautious with their reserves in case they have to use them to bail out ailing components of the wholesale market, says the Federation of Small Businesses.

Some of the FSB's members are having to pay rates of 10.75%, it says, an increase of 1% from the maximum lending rate for small companies in