Treasury call on banks to lend more money to SMEs

The Treasury has made a call to banks to lend more SMEs. Picture: PA

The Treasury call, which is expected on Wednesday, coincides with the publication of a key survey into the treatment of SMEs by the large high street lenders.

The report, commissioned by Chancellor George Osborne and undertaken by the British Chambers of Commerce and the Federation of Small Businesses (FSB), is likely to say that smaller firms still feel they are being shut out by the banks when it comes to borrowing cash.

It comes as new Scottish figures show that the number of business failures fell in the opening three months of the year, though there was a marked differencebetween SMEs and larger companies.

Experts at KPMG, the accountancy heavyweight, pointed to “relatively high numbers of liquidation appointments”, which typically affect smaller businesses, during the first quarter of 2014.

This week’s survey is set to rank the different banks based on how well they are meeting the needs of SMEs. It is thought that Lloyds Banking Group and Santander will have fared well in the rankings.

The Chancellor and Treasury officials are expected to give their backing to a new and independent website which has been created to provide some clarity around the services smaller companies receive from their banks.

The site is set to be called Business Banking Insight (BBI) and will identify how firms rate their lenders based on performance, service and understanding of the business. It is part of a drive to enable SMEs to continue to grow both in terms of size and headcounts, as part of the wider economic recovery.

In Scotland, SMEs account for 99 per cent of all businesses and for more than half of all private sector employment.

John Allan, national chairman of the FSB, said: “This groundbreaking site will, for the first time, provide insights into how small firms view the services they receive from their banks across a range of factors.” The Chancellor’s review of lending to SMEs was launched last November. At the time, Osborne said it would “provide the UK’s small businesses with a clear and credible way to judge how their bank compares to its competitors”.

As well as polling businesses themselves, the two lobby groups spoke to the big high street banks, the so-called challenger banks and alternative finance providers. A Treasury spokesman said: “The government wants Britain’s banks to do more to put Britain’s SMEs at the top of their priority list, and this new survey will provide the means by which we can see who’s up for the challenge and who isn’t.”

The KPMG figures reveal that the total number of corporate insolvencies in Scotland in Q1 dropped by 9 per cent to 239 compared to the previous three months.

The number of administrations and receiverships, which typically impact larger organisations, was nearly 34 per cent lower at 19, while the number of liquidation appointments fell by just 5 per cent to 220.

Blair Nimmo, head of restructuring for KPMG in Scotland, said: “Relatively high numbers of liquidation appointments suggest that although overall performance is promising, smaller businesses should continue with a cautious approach, keeping a close eye on costs and cash flow.”