The House of Commons Treasury Select Committee is looking into SME finance for what could be an important, influential report.
The inquiry comes at a time of general tightening of credit. Companies in the engineering sector are keeping a keen eye on customers’ ability and willingness to pay. Sharp increases in interest rates have affected some firms, including some that took out government-backed loans during Covid; most CBILS loans were on a floating rate (unlike BBLS, where the rate was fixed at 2.5%).
Some of the larger banks have been struggling to cope with the demands of Know Your Customer and Anti-Money Laundering regulation (KYC and AML). The government is considering adding to the de-risking reserve requirements on banks in respect of SME lending and carbon reporting/sustainability is becoming more of an issue. Anecdotally, we hear of the “big five” banking groups becoming more cautious, especially in supporting SMEs. Last year they provided just 45% of new finance to SMEs, the lowest proportion ever. (Source: British Business Bank.)
At the same time, there are opportunities to invest – in skills, processes and capital investments.
We (MTA through EAMA) would like to contribute to a response to the inquiry and would very much welcome members’ feedback, in confidence, on the questions asked. In particular we would like to hear from you on the following points:
• Are you reasonably happy with the finance available to your business is relation to a) short-medium term finance, b) long-term finance and c) scale-up finance (if seen as separate)?
• Please give your reasons for the answers above and any related thoughts that might be helpful.
• In the same vein, please specify the main challenges you face when seeking finance, if not already answered.
• How well do you feel your bank understands your business and do you think that matters?
• Through which channels do you find the most success when seeking funding and why?
• Should the government do more to enhance SME access to finance? And, if so, what? (For example, Israel has a scheme to support finance for manufacturers over periods of up to 12 years.)
• Any other comments – or queries?
You are, of course, free to make your own submission if you prefer – you can access the inquiry’s full survey at https://committees.parliament.uk/call-for-evidence/3178 (indeed you might want to take a look at the introduction text on the home page) but we would really appreciate some feedback so we can pull together some thoughts from member companies. Please send anything to Jack Semple (email: [email protected]) and Geoff Noon ([email protected]) – if possible we would like your input by Friday 3rd August to give us time to collate and submit your views.
ICAEW members report ‘frustrations with banks’: Jack Semple, Secretary of EAMA (who is on the advisory group of the ICAEW Manufacturing Community), notes that, according to the Institute of Chartered Accountants in England and Wales (ICAEW), access to finance is a growing topic of concern for firms across the economy, alongside frustrations in interactions with banks and frequent reports of delays in opening accounts.
Their Business Confidence Monitor for Q2 2023 says: “Rising interest rates have made finance more expensive and businesses generally have less cash reserves available. Access to finance is a growing topic of concern, alongside frustrations in interactions with banks and frequent reports of delays in opening accounts. A member is cited as saying: “Setting up a bank account for a small business is almost impossible. You can register a company in 10 minutes, find a client in a week, but it takes three months to open an account.”
The impact of the pandemic on attitudes to work is noted. Hybrid working is challenging and staff are resisting pressure to move back to working in the office. “Work ethic is frequently bemoaned across all sectors, with the pandemic blamed for changing attitudes towards work.” Labour shortages are reported by members across the economy, including in the accountancy profession, where audit and advisory staff are in short supply, ICAEW says. You can find more insights from the ICAEW survey at https://www.icaew.com/insights/viewpoints-on-the-news/2023/jul-2023/member-insights-july-2023.