Small firms would prefer to remain dissatisfied with their banking services than take the initiative to switch providers, according to a new study by the Forum of Private Business (FPB).
Of the several SMEs surveyed by the industry authority, just over half are content with their current provider and believe they get good value for their money. The most prevalent complaint from unhappy customers involved reductions of loans or overdrafts, with many banks even taking measures to call in existing lending facilities.
The basic demands of an SME
SMEs have long been recognised as the engine of Britain’s newly recovered economy, yet they still struggle to receive the service they need to prosper. 16 per cent of FPB survey respondents said access to capital is an ongoing worry.
Of the respondents surveyed:
Why alternative lenders remain on the side-lines
While more firms are learning about alternative providers, the majority remain reluctant to seek investment outside the traditional system. Only one in five would consider changing to an alternative provider for all their banking services, and 13 per cent would only consider them for some services or for additional finance.
“A growing economy poses its own issues for small businesses, as they decide whether to invest for expansion,” said Phil Orford, FPB chief executive. “The government, the banks, other lenders and business support organisations are all important enablers of growth and need to work together to ensure small businesses are getting the necessary amount of money in the right format.”
The most common objections to alternative providers were cost, awareness and lack of reliable advice. However, these providers are becoming increasingly advanced and could soon pose serious contenders to more established high street institutions.
A new watchdog promises change for the better
Better awareness and higher standards will certainly be on the agenda for the new Banking Standards Review Council (BSRC). This independent body will launch later this year, following a recommendation by the former director general of the Confederation of British Industry (CBI), Sir Richard Lambert. Its purpose is to maintain a consistent quality of service across both traditional and alternative providers.
“Sir Richard’s recommendations for banks to commit to driving continuous improvement, with transparent public reporting, alongside new good practice standards, are a sensible way forward,” said Katja Hall, deputy director general of the CBI. “With the political and regulatory spotlight now firmly on conduct, a swift and positive response from the banks to these proposals, combined with changes already underway, should help to rebuild trust in this important sector over time.”