SME Finance
Debate between Harriett Baldwin and Keir Mather
Dame Harriett Baldwin
I agree with my right hon. Friend. Inflation is the worst tax on our economy and important steps are being taken by the independent Bank of England to raise interest rates, to make sure that inflation gets back to its target zone. That all seems to be on track. Monetary policy has been tightened already, and we see that in the environment in which our small and medium-sized businesses are working. They have been squeezed by higher interest rates, and the evidence we received showed that the acceptance rate for credit has fallen from 80% to 50%, so it does not feel like the right time to be tightening access to finance for small and medium-sized businesses through a change in regulations. It particularly does not feel like the right time to be doing so unilaterally, when the EU and the US are not following the Basel 3.1 rules.
Keir Mather (Selby and Ainsty) (Lab)
I am also a member of the Treasury Committee, and I thank the Chair for all her hard work on this report.
On the overall question of the confidence of SMEs in their ability to access finance, the report raises some interesting figures. There was a £95 billion finance gap in large high street bank lending to SMEs between 2015 and 2022, alongside the softer pressures of SMEs fearing rejection in lending and the lack of trust in the lenders themselves. Will the Chair please provide an assessment of how she feels that appetite looks across the rest of this year and beyond? What tools are at our disposal to deal with the inherent caution in the SME lending market?
Dame Harriett Baldwin
I thank my excellent colleague for his question. He is absolutely right that the inquiry received evidence on what I would describe as financial apathy. Small businesses sometimes choose not to borrow, choose not to grow, In fact, only 5% of small businesses that seek lending would even consider shopping around to find another provider if they were rejected by their main bank.
There is work to do to encourage and guide SMEs, and the British Business Bank has a very important role. It is not well enough known, which is probably holding back the growth of many excellent small businesses. I am so proud that our Committee has been able to champion this.