The direct correlation between the recovery, jobs and the banks was highlighted in Monday’s evidence from Paul Rutnam, director-general of the Government’s own Business Group, who when asked what was critical to recovery, said “creating the right environment for small firms, in particular the SME and enterprise agenda.
“A lot of that revolves around access to finance.”
We know that only too well here in Scotland!
Our financial environment has changed but at what cost to commercially viable businesses and job losses?
Banks claim they are lending, whilst many SMEs continue to claim they can’t satisfy borrowing conditions, costs have escalated and attempts to negotiate better deals are cold-shouldered.
They can’t both be right but it is difficult to believe they are both wholly wrong.
Banks have rightly tightened up, stripping out layers of staff, effectively rebalancing their books. Fees and interest rates above base have risen. Businesses are now being threatened that tightening regulation could push up borrowing costs further.
Without a relaxation of capital adequacy regulations by the Government, banks will remain restricted in their ability to lend and the costs of borrowing will remain punitive.
In these circumstances, investors in property struggle to recoup the cost of their investment, so property values fall, deterring would-be investors.
If the private sector has to lead the recovery then reducing red tape is vital, and the Government must broker tangible improvements in support for SMEs to validate its vision that we sit firmly at the core of economic recovery.
Effective lending can never avoid risk -- a factor that is in the nature of enterprise.
But many businesses on the ground are suffering from blind rulings made from a distant lending unit, which won’t replace the time-proved virtues of individual bankers who know their particular clients, their track record and who have the knowledge of the business on the ground.
We seek behavioural change from some of our banks, which is about investing in our credible, successful business leaders.
To do that we need the Government and the banking community to reach an acceptable balance between sustaining a commercially profitable banking community but also one which understands and supports small and medium sized businesses more effectively and affordably than at present.
Let’s get on with it.
