Minister calls on banks to be more proactive in lending

Features Posted 21/06/13
As business minister and recently appointed energy minister, Sevenoaks MP Michael Fallon is well aware of the challenges facing our economy. Neill Barston meets him at his Westminster office.

Being tasked with a dual government ministerial role covering key areas of business and energy is the rare responsibility that has befallen senior Kent MP Michael Fallon.

But it is one he believes is entirely complementary and keeping him extremely occupied, as the chancellor grapples with moving the economy out of recession.

With some key issues crossing his combined business and energy desks, including backing the London Array scheme, unveiling long-expected yet controversial plans for the privatisation of Royal Mail and fielding businesses’ concerns over the Dartford Crossing, 2013 is keeping the minister extremely busy.

On the economic front, it seems George Osborne’s relief at confirmation from the Office for National Statistics (ONS) that we technically never entered a double-dip recession, is acting as a considerable catalyst for wider economic optimism.

However, as Mr Fallon explains, there’s no room for complacency, especially with a significant range of issues still hanging over many SME businesses within Kent, Surrey and Sussex, which require urgent attention - including the issue of levels of bank lending.

“The economy is turning - there’s no question that it is moving from rescue to recovery. The businesses that I have visited in the South East have left me in no doubt that the recovery is under way and that it is being led by the region.

“There’s a lot more to do with SMEs, there’s still not enough bank lending getting through to them. Too few are exporting and we are continuing to tackle those challenges by pushing banks to take more advantage of the Funding for Lending scheme, so we can get more money out to companies,” explains the business minister from his offices within the inner chambers of the Houses of Parliament in Westminster.

He adds: “We also want to make companies more aware of the appeals system in cases where their applications for funding have been turned down, as well as looking at alternative sources of finance including peer to peer lending and crowd sourcing to get money to those who need it.”

To his credit, Mr Fallon does not hold back in terms of his belief that our core high street lenders could, despite their protestations to the contrary, be doing more to help smaller enterprises to gain access to finance.

This has been underscored by a Federation of Small Businesses study this summer, which showed a staggering tally of 38% of firms that applied for financial assistance from banks failed to gain their applications at the very first stage.

While alternative sources of lending are becoming a reality for a number of companies, it is the traditional banking route that many perceive to be the key to unlocking meaningful recovery on a national scale.

Mr Fallon adds: “The banks need to re-establish the older style relationship banking that I notice newcomers like Handelsbanken have been very strong at. They need to re-discover their appetite for lending to certain sectors that have dropped out of fashion.

“Small firms are still complaining that they are not getting the finance they need. It does seem odd that we are having to use regional growth fund grants and other tax payer funds to step in to help with this when banks have failed.”

One of the key areas that has provoked most concern from companies that have engaged with South East Business has been that of business rates. It seems there remain many who fear trading in our high streets remains potentially prohibitively expensive. So is there anything more on rates that can be done by government?

“We have brought business rates down for small business and extended the original relief and deferred the re-evaluation to 2017 – there would have been a lot of losers across the South East had we gone ahead with doing this next year.”

In terms of Mr Fallon’s own role, he has been entrusted with an unusual level of responsibility with two major departmental portfolios, which will doubtless involve a number of major issues in the future.

He describes his joint portfolio of business and energy as being “very complementary” and believes that there will be a number of opportunities to get involved with the future energy debate at an early stage.

From the dilemma of how Britain will meet its lagging clean energy production targets, through to being seen to be responsive to the needs of enterprise have ensured a particularly packed diary for the minister.

“My role is to back success – we have some very successful companies that are doing some amazing work selling things around the round the world, but we need more of them. “So easier access to finance, helping SMEs that haven’t yet exported to help them export through specialist export finance through grants, to exhibiting at trade fairs and joining business delegations abroad.

“The £70million government has given to UKTI to help firms trade abroad should be a big boost to the South East, where companies have been fairly ambitions. “There are some in the region that have lost their traditional markets in the Mediterranean and are now looking far further afield to places like Brazil and Russia. A huge part of the new investment that we need is in energy; there are big opportunities there for SMEs in the supply chain. Off-shore wind, every new turbine and gas plant involves lots of SMEs.”

As covered earlier in this edition, the London Array is perhaps the biggest scheme presently on the government’s green agenda- how vital does he consider its success?

“The London Array will make a big contribution to meeting renewables target; it has brought a lot of jobs and UK content with it so it’s a very important project for the South East. We are working with the industry to see that costs are brought down and firms like Dong are confident they will be able to do that.

“But we are a long way behind on other European countries on renewables that contribute to electricity, so there’s work to do there.”

One of the most significant pieces of legislation Mr Fallon will have to deal with will be the Energy Bill, which is presently going through parliament. This examines potential renewable energy sources including biomass, tidal, shale drilling and wave energy as well as off shore, which the minister believes will all contribute to solving our long term energy needs.

“It’s an important bill and will directly help consumers and simplify tariffs and vulnerable people will be placed on the lowest tariffs possible. It offers a new framework for investment, which provides clarity potential investors in energy need.”

While there are plenty of state issues to be dealing with, matters in his own patch of Sevenoaks in Kent are just as pressing ranging from commuters fears over rail fare increases, through to grammar school expansion and worries over the future of the Dartford Crossing.

Though Mr Fallon did not wish to offer his personal view on a preferred option, he felt the scheme, wherever it is built is an absolute necessity.

“We need to help ease the congestion now at the toll booths. There are plans pushing on with the electronic systems that will make traffic management much easier, which is important, but we need to plan for a second crossing. It is obvious we have to have another crossing somewhere - Blackwall tunnel and Dartford are getting very congested and there are several options.”

Tweets from @SEBmagazine