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A general pledge by Britain’s top banks to help businesses through the downturn has emerged, dashing the smallest traders’ hopes for detailed and collective action. Both before and after a meeting called by the chancellor to discuss their treatment of firms, the banks only committed to ‘continuing to support’ their business customers. The outcome of the meeting on Friday between Alistair Darling and the heads of lenders including RBS and Barclays will disappoint small firms and their lobbyists. Like the rescue package given to banks, the Federation of Small Businesses says a rescue fund for small firms should be provided, if jobs are to be saved and the downturn curtailed. Not only are firms suffering the effects of the slowing economy, but also banks have passed on their own financial pressures by increasing or imposing hefty fees on loans and accounts. Serving to restrain their cash-flow even more, the payment time for small firms has increased, evidenced by Tesco’s demand that its suppliers must wait an extra 30 days to be paid. The reported move shuns the state’s declaration that all organisations, including its own, should pay invoices within 10-30 days, not 60 days as the supermarket plans from December. Another appeal made by the state to support small firms is that their banks must return lending to 2007 levels, in order to restore confidence and assist those in financial jeopardy. But responding to all these appeals, the British Bankers Association, the industry group, said “commercial realities” made it “inevitable that some business will not survive” the recession. The response will dishearten ministers who gave HBOS, Lloyds and RBS taxpayer funded equity to the tune of £37bn on condition they would make lending available at last year’s level. Problematically for this course of action to work is the ongoing reality that all the banks price risk, meaning the cost of borrowing their monies will rise as the economy deteriorates. “The businesses that will succeed through this downturn are those currently reviewing their business plans and engaging with their banks to prepare for a slump,” the BBA said. Chief executive Angela Knight added that the group would be writing to MPs to spell out the actions individual banks are taking to help small businesses address the downturn. Some of those actions reportedly include loan repayment holidays for firms needing access to emergency funds, said to be available at Lloyds TSB, NatWest and RBS. Disclosures obtained by the Mail on Sunday add that RBS, which could soon by substantially owned by the state, will appoint a new role and executive to oversee lending to small firms. Peter Ibbetson told the paper that half of the bank’s managers have never known a recession and that complacency may have crept into their dealings during the buoyancy of recent years. He said RBS would adopt a three-point plan: reassure and support firms, help with cash flow, and implement a fair price for borrowing, which should reflect the higher cost but show RBS is not profiteering. Aside from help from their private sector lender, small businesses have been told they can get a free financial ‘health check’ from Business Link so critical problems can be identified early. They have also been promised financial advice from the Institute of Credit Management, including tips on cash flow, securing finance and addressing late payment. More crucially, Business Secretary Peter (now Lord) Mandelson has pledged that small firms must have a voice in Whitehall about the facilities and treatment they get from banks. David Frost, director-general of the British Chambers of Commerce, said it was up to ministers to ensure the Small Business Forum “has the teeth to really make an impact” on future decisions. He said: “If its purpose is to hold banks to account and provide a supportive and worthwhile dialogue, then Lord Mandelson's announcement for a new small business lending forum is a good thing. But, if the group ends up around a table talking instead of showing real leadership and taking action, then it will be meaningless.” Oct 27, 2008 Email this article Printer friendly page Previous Page
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