It is no surprise that small and medium sized businesses have
been the worst hit by the credit squeeze since the financial crisis
kicked off. It's only too easy to recall top headlines announcing
that five major bank lenders in the UK would support the
Government's £76 billion pledge to get credit flowing to
businesses.
Bank of England figures revealed yesterday report that British
banks have missed their lending target by £1 billion. This has
certainly set the twitter sphere alight. Barclays, HSBC, Lloyds
Banking Group and Santander UK publicly said they met their
individual targets but RBS, which is 82% owned by the taxpayer,
missed its share. On top of that, Osborne approved a £500m bonus
pot for RBS despite it missing lending targets.
Some may argue that this shows that Project Merlin and other
measures have not helped as much as expected. However, the numbers
could also be interpreted to show that banks are actually committed
to lending as they came close to the targets set. The problem
may be that SMEs are not entirely happy with the terms and
conditions banks set. This is particularly frustrating when banks
have exceeded their overall gross lending target of £190 billion by
nearly £25 billion. Data also shows that only 7.8 per cent of
government contracts were awarded to SMEs during the end of last
year, rather than the promised 25 per cent. What does this mean for
SMEs?
A recent NatWest survey found that in reality some SMEs,
particularly those in Wales, are less optimistic than the UK
average on prospects for the rest of the year. They do not rank
access to finance as a main priority. Instead, they would rather
concentrate on keeping their businesses going by identifying new
customers and markets.
In reality, this may be the cause of the problem. It suggests
that there is still a lot to be done to restore confidence and make
SMEs realise that funding is available and that this is an
important way of boosting expansion and growth prospects. The
Government must move away from meeting numbers to instead
implementing initiatives which focus on credit easing. As the
shadow Treasury minister, Chris Leslie MP rightly said banks also
"need to acknowledge they have been spending more time securing
their own balance sheets than helping growth and employment in
small firms."
When push really comes to shove, the focus of government
activity needs to be on action, not just numbers. Small firms need
support not just highly publicised initiatives if they are to be
set on a path back to sustainable growth. Businesses also need to
bear in mind that it takes time to build a good credit history and
so even if they do not have an immediate need to access finance;
it's never too early to start building up your credit rating.
Useful tips for SMEs and newly incorporated businesses can be found
here http://bit.ly/x9WxnG
