Bibby Financial Services comments on banks failure to lend £30bn to UK small businesses

Commenting on a report released yesterday by the National Audit Office, which shows banks have failed to lend a target of £30 billion to small businesses in the UK, Edward Rimmer, UK chief executive at Bibby Financial Services, says:

“The fact that there is a £30 billion discrepancy between the amount of money lent to small business in the UK and the original target set by the Government is disappointing. This situation is made worse by the determination of the banks to provide £7 billion in bonuses to senior staff over the next few weeks, despite their reluctance to lend. This may rub extra salt in the wounds of UK firms, many of which continue to struggle in the current economic climate.

“We know from our own research* that, despite the UK officially being out of recession, almost a quarter of businesses (22 per cent) feel that trading conditions are tough and they are only just surviving. This proves that there is a clear necessity for businesses to be financially supported and by depriving them of £30 billion of rightful funding, the banks have not played their part in boosting both business confidence and performance.

“We all know that access to finance is intrinsic to the survival and growth of our country’s small businesses, which are the engine room of our economy, and the Government set the business lending target for a reason to ensure this would happen. With this in mind, it is not acceptable that financial support has been withheld when it is clearly needed. For example, we have seen a 10 per cent increase in the number of firms using our invoice finance facilities in 2010. Businesses are not only recognising and trusting invoice finance as a more flexible and accessible form of funding, compared to bank overdrafts and loans, but also a more reliable one.

“Looking ahead to next year, it is vital that the Government and Vince Cable take robust action to ensure banks increase lending to UK businesses and allow them to achieve their potential to drive economic revival in this country.”

* Bibby Financial Services Business Factors Index, October 2010