David Cameron says banks must lend more, but will this actually happen?

Editor’s Blog Posted 31/01/14
Should London's major banks be lending more to regional SME firms? It's a question that is not going away in a hurry...

Watching this week’s first ever FSB policy conference, there was a good deal of enthusiasm surrounding David Cameron’s pronouncement that government had removed record levels of administrative red tape affecting business.

Unsurprisingly, his candid admission that our banks really should be lending more money to the near five million small and medium enterprises that form the backbone of our economy was equally warmly received.

But intriguingly, from speaking to several Kent firms eagerly taking in the event being streamed live around the region, such promises appeared to ring just a little hollow.

What were their issues? For starters, the biggest bone of contention lay in the fact of difficulties in gaining initial start-up loans to buy or rent business premises.

Tellingly, in some instances, some daring entrepreneurs have simply bypassed banks in favour of raiding their own or a family member’s slender financial reserves in order to drive a business venture forward.

So with this apparent disconnect in mind, what more can our banks really be doing? With RBS and Lloyds in particular still being part-owned by the public, it would be great to hear even more success stories coming from these banks.

According to figures released by Lloyds, a total of eight out of ten loan applicants are approved for finance, though statistics on how many people actually attempted to start the process and gave up due to the frustration with it all are nigh on impossible to obtain.

The situation becomes even more worrying with the announcement this week from Lloyds over 1,300 job losses- 450 of which were in its relationship managers dealing specifically with small businesses.

Barclays too has made a decision that a fair chunk of its branches may eventually disappear, as supposedly we’re not using banks any more. Is that really the case? Or is it more a matter of strategic cost cutting?

On a more positive note, the much-hyped national Business Bank, beloved of Vince Cable, could be the potential missing link in reaching out to many firms that have felt somewhat alienated by the prospect of approaching high street lenders.

But the delays in fully implementing this well-intentioned project come at a time when businesses really are in need of greatest support – at the tail end of recession and looking for means to grow. It is perhaps time government stepped in to take more decisive action on this vital issue.

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