Chancellor of the Exchequer, and hamburger fan, George Osborne has pushed the banking sector to accelerate their lending rate to SMEs.
Only last week new lending figures were released that showed that in the first quarter of 2014 lending under the ‘Funding for Lending Scheme’ which was launched in July 2012 and designed to stimulate lending to SMEs had fallen by £2.7bn.
Osborne, remaining concerned about the support for SMEs from UK lenders commissioned a survey from the British Chambers of Commerce (BCC) and the Federation of Small Businesses (FSB), to establish the true state of finance availability for small and medium businesses.
Osborne introduced the initiative, which kicked off in 2013 as aiming to:
“Provide the UK’s small businesses with a clear and credible way to judge how their bank compares to its competitors”
The survey will be released every six months, for now, in its first iteration the key findings are a lack of trust and almost no lending to businesses less than five years old, potentially compromising an essential phase of business growth.
Both the FSB and BCC are also behind a new ‘signposting’ website, funded by the Royal Bank of Scotland, designed for SME businesses to facilitate a higher level of understanding of the services business should and do receive from their banks.
The website, www.businessbankinginsight.co.uk allows individual businesses to rate their banks based on their support, service, performance and crucially their understanding of the needs of smaller businesses.
Supporting the move, the Treasury said:
“The Government wants Britain’s banks to do more to put Britain’s SMEs at the top of their priority list, and this new survey will provide the means by which we can see who’s up for the challenge and who isn’t.”
To help facilitate this, as part of his budget announcements earlier this year, Osborne raised the potential for legislation to be implemented whereby the banks would have to release information and data on those SMEs who they had rejected for being recipients of finance.
Now, despite vehement opposition from the baking sector, the government is intending to use the Queen’s speech this week to oblige banks to do exactly that and refer SMEs to alternative lenders where they reject their applications.
Currently it is the case that SMEs, where they have been rejected for new credit terms, rather than shopping around, they accept the decision and scale back on their plans. Clearly this is a sub-optimal position for an economy in need of growth.
Osborne said:
“A key part of our long-term economic plan is increasing competition and choice in banking, and ensuring Britain’s SMEs get the best possible service from their bank. This new survey will be a powerful tool for these businesses, providing them with the means to see who’s up for the challenge and who isn’t.”
Banking and Business Energy
The similarities to business energy here are astonishing, SMEs meeting a brick wall from the banks, in the same way as they do from their energy supplier, and settling for the status quo:
- insufficient, high cost lending from the banks, and
- overinflated costs and poor service from the energy suppliers.
- The Big 6 energy suppliers still supplying the vast majority of SME customers, often on overpriced contracts borne out by the failure of businesses to switch supplier.
- The Big 4 banks still providing financial services to 85% of the SME market.
and
- Both sectors have being found sorely lacking for trust and providing value for money.
Whilst there is no Business Insight website currently dedicated to energy, Business Juice applauds the FSB for their support of this website. We can’t help but be concerned however that the FSBs support is not reciprocated for those ‘signposting’ the business energy market in the same way.
The FSBs concept of an independent website providing valuable information to the business market enabling them to strike a deal that suits their business’ needs and which is both competitive and fair is exactly the concept that the FSB rails against when it comes to business energy. This is confusing.
The force for good that underlines the expectation of the Business Banking Insight concept is exactly the operating principle of many TPIs in the business energy market, a sector the FSB does not endorse. As a result the FSBs membership are losing out on significant savings, with just 4% of their members using a broker to switch energy supplier and the remainder estimated to be overpaying for their energy to the tune of £124m per year the need for additional credit and support from their banking partners could be mitigated by taking control of their energy contracts.
Whilst we support the FSBs move to bring clarity to the financial markets for hard-pressed SMEs the fact that the same intention is not extended to the energy market is an anomaly that needs to be addressed in short order.