News

March 15, 2013

SMEs say bank reforms won't boost lending

As Nick Clegg promises to put the Funding for Lending Scheme "on steroids" this week, the Government's plans to reform banking have come under scrutiny. And the verdict from small businesses is that ring-fencing banking activities won't make it any easier for small businesses to borrow money.

Research carried out by RSM Tenon has revealed that 65% of SMEs believe the Parliamentary Commission on Banking Standard's proposed ring-fencing of banking activities (separating investment banking from retail banking) will make banking safer. 

However, it also found that 36% of SMEs think it will actually be harder for small businesses to borrow money, with only 21% believing it will be easier to obtain funding after ring-fencing.

The survey also found that Government plans to introduce a state-supported bank that would loan money to SMEs were well-received — almost 60% of SMEs thought this was a good idea, with only 18% saying it was not. 

Tom Maclennan, head of lender services at RSM Tenon, said: "People believe, I think rightly, that while this change would make retail banking safer, it will make no difference to their ability to borrow. The reality is that the scale of lending up to 2008 is now viewed as inappropriate and only time and a return of confidence will change lending/borrowing behaviour and actions."

Meanwhile, it has emerged this week that the coalition government is planning to improve the Funding for Lending Scheme (FLS) in the light of disappointing lending figures published in March and charges that its flagship credit creation programme is failing small businesses. A senior Liberal Democrat told the Financial Times: "We are pushing for FLS to be extended and there is general agreement between both sides of the coalition. Can we extend it, can we increase it, can we direct it to SMEs? These are the things on the table."