Banks Ready at Table to Help Boost Business Confidence; Angela Knight, Chief Executive, British Bankers' Association
Byline: Angela Knight
At this stage in this uncertain economy, demand for credit is comparatively low.
The picture is the same if you are an individual borrower or a major company: in the face of economic uncertainty, you work to minimise your outgoings. For individuals those outgoings include mortgage payments, which is why we are seeing so many people paying down their mortgages at the moment. For businesses, it is largely loans and overdrafts which are being paid off or reduced in the face of the downturn.
A bank cannot do anything about these personal or business decisions. The result is that the stock of lending goes down. Currently the stock of lending by banks to manufacturers stands at around pounds 14.5 billion. Lending to manufacturers rose by pounds 163 million in July, but the general trend is downwards: this year up to July had seen an average fall of pounds 155 million each month.
What is suppressing demand is principally lack of confidence. Where businesses have suffered a significant drop in the number of their customers, the likelihood of getting them back in the short term is not good. Of small-to-medium businesses UK-wide, more than half have said the main obstacle to their growth was economic uncertainty. Others have cited restrictive legislation, or lack of skills. About one-fifth have said there were no barriers to their growth. Only two per cent have said they expected finance to be an obstacle. Of course there are plenty of statistics on small businesses, but some are of varying quality and others are of dubious provenance. So I should say up front that the numbers I have just quoted come from a bank-funded study - the SME Finance Monitor - produced with rigorous independence by BDRC Continental for scrutiny by the banks, Government bodies and business representatives which support the Better Business Finance initiative.
The SME Finance Monitor is the biggest survey so far of businesses' attitudes towards external finance and their experiences of pursuing it. It is a quarterly survey of more than 5,000 businesses, and it is an authoritative and openly available source of information for anybody interested in finance for business.
I mentioned the Better Business Finance initiative. As an industry, banks are at the table and ready to make the necessary changes to increase business confidence by freely giving them the help they need to get their financial applications right. …