UK banks told to change as more businesses refused loans

Restricted lending is barrier to economic recovery


The UK’s leading business organisation has challenged the Independent Commission on Banking (ICB) to revolutionise the UK banking system.

The Federation of Small Businesses (FSB) has spoken out following the ICB’s interim report, which claims that high street banks are experiencing little demand for finance from small businesses. This is in direct contrast to the FSB’s own Voice of Small Business member survey, released in June; according to the study, a third of members who have approached the banks for credit in the last 12 months have been refused – the equivalent of 320,000 businesses.

The ICB is due to issue recommendations to the government this autumn, and the FSB believes this presents a crucial opportunity to enact major change.

John Walker, national chairman of the FSB, said that “experience shows that demand for credit is at its highest when the economy starts to enter a recovery period.”

He added that banks must “work with businesses to ensure that they can get the finance they so greatly need.”

Meanwhile, Judi Brazkiewicz, chairman of the FSB’s Worcestershire branch, suggested that the ICB should consider decentralising the banking structure, saying: “Bank managers no longer know their customers and decisions are made centrally in accordance with pre-set criteria.”

She added: “FSB has met with bank officials who tell us that they are very much open for business but when we refer business owners to them they are turned down. It strikes me that the banks will only lend to those businesses which don’t need it.”

The FSB’s comments come less than a week after new figures were released by the Bank of England, showing that lending to small businesses fell by £1.8bn in May.

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