Manufacturers accuse banks of 'inappropriate interference'

SCOTLAND'S manufacturers have turned the heat up on the banks – and Bank of Scotland in particular – by accusing them of being extremely unhelpful and interfering in the running of businesses.

• Peter Hughes: "The last thing that an engineering manufacturing company executive wants to have to do is spend precious time completing unnecessary paperwork"

Lobby group Scottish Engineering said yesterday that the banks continued to penalise even the strongest firms, despite assurances to the contrary.

The organisation, representing more than 400 engineering firms, said it had been inundated with calls from members unhappy with their lenders. They have complained about the banks' attitude and of hiking arrangement fees and interest rates on overdrafts.

Chief executive Peter Hughes said even some of Scotland's longest-serving manufacturing firms with solid order books were having to submit to "intrusive" and bureaucratic interrogations from lenders in order to secure finance. In some cases, firms face interest rates of as much as 10 per cent.

He said: "Bank officials are also perceived as interfering with the running of businesses. Even companies with strong order books and a reasonable cash situation are being asked for written summaries on business practices, future plans and other operation issues, which are totally inappropriate.

He added: "Anyone with half a brain will appreciate that in the current economic climate, when work and orders are at a premium, the last thing that an engineering manufacturing company executive wants to have to do is spend precious time completing unnecessary paperwork."

He said assurances had been given that banks would loosen their purse strings, but "this just isn't happening". Members reported that Clydesdale and HSBC were "more responsive" to their needs.

The Scottish Engineering outburst comes just a day after research from the Institute of Directors showed that more than half of companies which sought funding in the past year were turned down.

Business groups say there remains a chasm between the claims being made by the banks and politicians, and what businesses are experiencing on the ground.

A spokesman for Lloyds Banking Group, which owns Bank of Scotland, refuted the claims. He said: "We strongly dispute these allegations regarding loan pricing for our business customers.

"As part of our SME Charter, we have made pledges to help ensure firms have clear information and certainty about the finance they receive. These include a pledge that the margins we charge over our cost of funding will only increase where there has been a material increase in risk."

He added: "For arrangement fees, we have pledged that any such fees on loans and overdrafts will not be greater than 1.5 per cent of the overall value of the facility."

A spokesman for RBS said: "We believe in being open and transparent about pricing and have made commitments not to increase the margins on overdrafts, to cap arrangement fees at 1.5 per cent per annum on loans and overdrafts and to provide two years' free banking for start-ups."

RBS has launched a 1 billion fund specifically for manufacturing firms, he added.