SCOTLAND’S core band of small firms are starting to invest for growth rather than borrow for survival as they eye “huge opportunities” in 2014, one of the country’s most senior bankers has said.
Alasdair Gardner, who heads Lloyds Banking Group’s mid-market and small and medium-sized enterprise (SME) operations north of the Border and oversees billions of pounds of lending, believes the sector has reached a turning point.
Unveiling fresh lending figures, he said the closing months of 2013 had seen “signs of a definitive recovery” and forecast a further reduction in the number of distressed firms in the new year.
“We are more positive than we were at this time last year,” he told Scotland on Sunday.
“We are seeing people starting to grow and build capacity to tackle new markets elsewhere in the UK or overseas.
“I am very upbeat for 2014, which is going to be a fantastic year in terms of what is happening and the opportunities provided by the likes of the Commonwealth Games and Ryder Cup,” he added. “It is a marvellous opportunity for Scotland to showcase itself but the big thing is how businesses use the publicity generated for 2015, 2016 and beyond.”
Figures disclosed by the bank show that, up to the end of the third quarter, more than £3.4 billion was lent to firms in Scotland – an increase of 5.4 per cent on the year before.
The year-on-year growth was greatest among SMEs – classed as businesses with a turnover of up to £25 million – with a rise of almost 6 per cent to just under £1.4bn.
Lending to mid-market companies, those with turnovers of between £25m to £750m, totalled almost £2.1bn, an increase of just over 5 per cent.
Gardner, who joined Bank of Scotland, now part of Lloyds, in 1987, defended his brands over criticism from trade bodies that the big lenders are still failing to provide sufficient finance for growing companies.
Recent data from the Bank of England has painted a mixed picture for the flagship Funding for Lending Scheme (FLS) – a joint initiative between the central bank and the Treasury – suggesting it was having a limited impact on SMEs, though larger companies were benefiting. Gardner said the scheme – under which banks and building societies are allowed to borrow money cheaply from the Bank of England as long as they then lend that cash to individuals or businesses – had allowed the cost of borrowing to come down for Scottish businesses.
The recent decision to withdraw FLS support for mortgages is expected to provide a boost for SME lending.
“A lot of it comes down to increased confidence,” added Gardner. “We are certainly getting the message through that we are open for lending.”
Lloyds also issued figures showing that 85 per cent of businesses managed by its support unit had “come out the other end” and back into the mainstream bank.
“That is up on the previous year,” noted Gardner. “We are seeing more businesses that have been affected by the recession starting to return from our support unit.”
He identified oil and gas, manufacturing, tourism and property as key areas of growth in terms of lending and investment in the year ahead.
Acquisitive web hosting outfit Iomart, expanding butchery business Malcolm Allan and deli chain Peckham’s are among the Scots firms to have agreed financing deals with the bank.