Eight out of 10 small companies in Britain shun borrowing -survey

LONDON, Nov 28 (Reuters) - Eight out of ten small companies have not applied for any sort of finance in the past year, a survey showed on Thursday, raising questions about the depth and sustainability of Britain's economic recovery.

A survey of 50,000 firms by market research company BDRC Continental (Xetra: CON.DE - news) in the third quarter of this year showed only 15 percent of small firms had borrowed in the previous 12 months, down from a peak of 25 percent in early 2012.

Applications for new or renewed loans and overdrafts fell to 7 percent from 12 percent in the first quarter of last year, their lowest level since the survey began three years ago.

Britain has enjoyed a strong economic recovery this year, but growth has been primarily driven by consumer spending. Policymakers would like to see a pick-up in exports and business investment to be confident that the recovery will be sustained.

The government revamped its "Funding for Lending" scheme earlier this year to give banks additional incentives to lend to small businesses, many of which found it all but impossible to get credit during the crisis.

Just under half of small and medium-sized firms planned to grow in the next 12 months. Firms with employees were markedly more optimistic about the current climate than those employing just one person.

The chief executive of the British Bankers' Association, Anthony Browne, said the figures showed many small businesses were underestimating their ability to get credit.

"There is still a perception gap," he said.