Banks put squeeze on pub borrowers

Banks are beginning to turn the screw on pubs as the global economic crisis hits the high street.

Business loans and charges for overdraft facilities are showing a steep rise and licensees are now counting the cost of the global meltdown.

Some borrowers are being charged up to 4.35% more for their overdraft as lenders seek to rebuild their margins and capital bases amid problems borrowing on wholesale money markets.

Licensee Ashley Simpson, of the White Horse, Badwell Ash, Suffolk, has seen his overdraft terms from Nat-West double overnight. Simpson, who owns the freehold of his pub, has been paying 4% over base for a £5,000 ongoing overdraft facility for the past four years but was shocked when the bank told him the new rate had shot up to 8.35%.

"The overdraft was due for review in September but Nat-West wrote to tell me the terms had doubled without any warning whatsoever."

"I have tried to talk to them to negotiate a lower figure, but they do not want to know," Simpson said. Association of Licensed Multiple Retailers chief executive Nick Bish said the effects of the banking crisis had spread into the economy and were now spilling over into "real life". He said the current banking meltdown could be just the start of a three-year period of gloom. Federation of Licensed Victuallers Asociation chief executive Tony Payne said licensees needed to be aware of when banking agreements run out.

"Banks are clearly very wary about lending to the pub sector in any form because of the general state of the market," Payne said. NatWest said it could not comment on individual customers' affairs, but said any decisions were taken on a "case-by-case" basis.