So what if it doesn’t?
Well first of all there will be some political posturing. The Labour Party will blame the Government, the Government will blame the banks and the banks will say there is a lack of demand. And to a degree there is, but there is also no denying that some sectors are facing difficulties in accessing finance. It may well be a bank relationship manager has the authority to lend up to £250,000, but not if the internal bank systems still say no.
Firstly, the government could actively encourage challengers to take on branches due to be left by existing banks. The Forum of Private Business and the Campaign for Community Banking Services have long urged the Government to pressure the UK’s big banks to share local branches as a solution to spiralling bank closures. Analysis shows that more than 7,500 branches have closed since 1990 and the impact of closures on communities and businesses is in danger of being overlooked.
Second, they could get tough on the appeals process launched by the banks in 2011. In theory, once a business is turned down for a loan they will be told of the right to appeal. In reality, around 10% of businesses say they recall being made aware of that right. There are a number of positive ideas floating around as to how this awareness might increase but action is surely needed soon.
- Thirdly, rather than seeking new finance, measures could be taken to free up existing cash flow. At present there is £37bn tied up in late payments. That equates to just 5% of the £750bn estimated to be sitting unused on company balance sheets. If we can encourage a prompter payment culture that 5% would be all but wiped out and swilling around businesses instead of lying dormant.
The Government recently fine tuned its flagship Funding for Lending Scheme (FLS) to make it more rewarding for banks to lend money to small businesses rather than through mortgages, the main criticism of the scheme to date. Here the Forum's Head of Policy, Alex Jackman, explains how this could help small businesses to access the finance they need.