FSB head’s warning to the banks
THE Middlesbrough-based chairman of the Federation of Small Businesses said today that banks “had been warned” over their treatment of SMEs struggling to cope in the financial downturn.
John Wright, who runs CATC Training, was due to meet Business Secretary Lord Mandelson during the first Small Business Finance Forum set up by ministers to address issues affecting smaller firms.
Following the meeting, the FSB would be carrying out large-scale, regular monitoring of its 217,000 members to see how the banks responded, said Mr Wright.
With colleagues from the Chamber of Commerce, he was expected to say that many “sound” small firms could go bust by Christmas unless banks heeded Government calls to pump more liquidity into the sector.
“We are sick of the banks’ attitude,” said Mr Wright. “We do not expect them to act uncommercially, but we do want them to react responsibly.”
The Federation, which said it already had evidence of worrying inconsistences in bank lending policy at grass roots level, said it would be asking its members for evidence of, among other things, banks increasing the cost of existing finance, converting overdrafts to fixed term loans with less preferential rates, punitive arrangement fees, and reneging on previously agreed facilities.
He called on all banks to promote the Government-backed Small Firms Loan Guarantee Scheme in preference to their own lending and urged more to join Barclays, Alliance & Leicester and Close Brothers in registering with the European Investment Bank to become a conduit for £4bn of funding for smaller firms.
He praised LloydsTSB for immediately passing on the Bank of England’s base rate cut to commercial clients, but said he would be among those calling for tough action from the Government if rescued banks failed to reinstate 2007 lending rates.
“As the major shareholder, the Government must force them to do so,” he said.
David Frost, director-general of the British Chambers of Commerce said before the meeting:
“We have received numerous calls from small businesses who are trying to manage cashflow, but credit such as overdrafts are being withdrawn indiscriminately and terms changed without notice.”
Lord Mandelson said: “What is important now is to identify the concerns faced by both businesses and the banking industry and open up a dialogue to try to resolve these issues.”
