Russell Luckock: Banks holding up the recovery

Sep 13 2010 by Russell Luckock

Businesses throughout the West Midlands will confirm the continuing reluctance of the banks to lend money to small enterprises, which are the lifeblood of the economy.

Now we have the alarming news that said banks are commissioning a report for presentation to Government, justifying their stance.

The have handed out this task to pH, a subsidiary of Experian, who, they hope, will justify their current policy of not lending to a wide range of applicants, particularly in the manufacturing field.

It is quite amazing that they are prepared to spend money on such research, rather than examine more closely the requests for assistance from their customers.

Many observers feel that it is time for the banks to reverse their policy of centralised control, and revert to having managers at the branches who know the customers in their patch and can more realistically assess the creditworthiness of the client.

Perhaps more than in any part of the country, the West Midlands is made up of thousands of small enterprises, the owners of which would much rather pilot their own course through the rough seas of commerce than be part of a large conglomerate where tenure of office is always problematical.

These days, with large firms the older the employee, the more likely they are of being thrown onto the scrap heap.

Business Secretary, Vince Cable has time and again during the first few months of this Government, called upon the banks to loosen their purse strings, all to little avail.

It is still extremely difficult to obtain any support whatsoever, and if a company does get lucky, it is subject to very stiff arrangement fees and obscenely high rates of interest.

The Audit Commission had the shock of its entire life when they learnt that they were to be disbanded, the work being handed out to private enterprise.

Perhaps a shock of similar magnitude should be handed down, not to disband the banks but to subject them to penal taxation should they continue with their present policies, with perhaps a salary/dividend cap should they continue to ignore Government wishes.

David Cameron has stated time and time again that he wishes to see the development of SMEs. Very laudable, but utterly useless if the means of development and research are denied.

Time for action now, and the abandonment of exercises designed to justify the current stance of most lending institutions.

* Russell Luckock is the chairman of fabrication firm AE Harris