Small and Medium-sized Enterprises

Debate between Baroness Brinton and Lord Popat

Tuesday 19th November 2013 Lords Chamber

[Lord Popat]

My Lords, it is important to set the picture in context. According to the British Bankers’ Association, the current stock of lending to SMEs by the top seven banks is more than £99 billion. By this measure, around £2 billion is lent by the banks to SMEs every month. SMEs are actually twice as likely to be successful when applying for finance than has been predicted.

The World Bank’s ease of doing business index puts the UK as the top place in the world for accessing finance. I think this overstates how things are. In any case, we know that there is scope for improvement. Clearly, it is a tough environment for small businesses. Although net lending might have dropped last year, I am pleased to report to the noble Lord that gross lending has gone up, as did net lending in September.

[Baroness Brinton (LD)]

My Lords, the August SME Finance Monitor showed a welcome increase in SMEs seeking finance, from 39% to 44%, but this increase is from less conventional sources of funding; for example, lease and income financing, which focus on cash flow rather than growth. The report went on to say that 25% of SMEs expect their loans to be turned down, whereas in fact 50% are successful. What can the Government do to encourage more SMEs to apply for finance for growth?

[Lord Popat]

The noble Baroness makes a very important point. SMEs are more likely now to have an alternative source of finance, including asset or leasing and quite often inward discounting. They are not approaching their own banks as much as they used to, but I am pleased to report that banks are now proactively lending money to SMEs.