The second BRDC Continental SME Finance Monitor was released today showing that demand for finance may be easing as SMEs become increasingly concerned about the economic outlook.
However, of SMEs described as ‘would be seekers’ of finance (12% of the sample), the main reason cited for their not having applied for finance was being discouraged for fear of being turned down by their provider. This discouraged factor clearly is directly suppressing demand.
Commenting, EEF chief economist, Ms Lee Hopley, said: “These results suggest that the job to rebuild relations between business and the banks is far from done. Too many companies are still put off applying for finance for fear of how their requests will be treated, while half of businesses approached by their banks to cancel or renegotiate their facility were given no reason why.”
“It’s also worrying that manufacturing companies who have been leading the recovery and looking to invest are facing greater obstacles to securing the finance they need. With credit conditions still standing in the way of growth, the Government must use the Autumn Statement to set out its plans to increase competition and to press the banks to work more effectively with business.”
Other findings included:
- Over the wider set of results including the first release of the SME Finance Monitor in July, 63% of companies overall were granted new/renewed loan requests but worryingly being in the manufacturing sector made a decline more likely;
- 37% of new/renewed overdrafts granted to manufacturing companies required security compared with 25% for the overall sample;
- Half of businesses approached by their banks to cancel/renegotiate their facility were given no reason why.
The Autumn Statement on 29 November gives the opportunity for the government to set out clearly its ambition for making the UK a great place to start, grow, and finance a business. In particular it could:
- Indicate its general agreement that competition in the banking sector needs to increase (with a more detailed response to the Vickers report before the end of the year);
- Support ways to increase sources of both debt and equity finance outside of banks;
- Continue to press for better business-bank relations.