Small businesses terrified of banks, says report

Banking bullies are leaving businesses shaking in their boots if new government-sanctioned report is to be believed.

by Gabriella Griffith
Last Updated: 29 Aug 2013
Vince Cable is having an up and down week. One minute the business minister is celebrating Bank of England figures, which say lending to small business is at a two-year high - hurrah. Next, he’s handed a damning dossier, which makes banks sound like the spawn of Satan.

A report commissioned by the department of business and produced by government advisor Lawrence Tomlinson, chairman of LNT Group, finds evidence of ‘misconduct’ among banks, including ‘disturbing patterns of behaviour’ towards small and medium sized businesses.

Among other things, the report accuses banks of stymieing lending and piling extra charges onto ailing companies. This comes at a time when Cable and his pals at Whitehall have specifically charged banks with the task of helping Britain’s small businesses.

‘There’s a huge disconnect between what banks are saying and what we are seeing. Businesses are being destroyed and people’s lives are being ruined by really bad behaviour,’ says Tomlinson.

‘There is a complete lack of trust towards the banks, and in many cases, this is ... justifiable. This is coupled by an astonishing fear of the banks, no one dares tell it as it is.’

According to the report, the UK’s plucky small businesses are afraid to speak out against the banks for fear of reprisal.

'It only takes the silence a few good men for bad behaviour to triumph. How can we increase lending when there is this level of distrust and the message remains ‘business as usual’ in the banks?’ he adds.

The report also highlights conflicts of interest between banks and the accountancy firms brought in to do reviews of businesses going through restructuring processes.

Understandably, Cable apparently finds the report ‘worrying’. Parts of the report, which refer to RBS, are apparently being handed over to Sir Andrew Large, who is leading an independent review of RBS’s lending practices, for review. Nice gift for the state-backed bank’s head of retail Ross McEwan if he does take the position of chief exec, as suggested.

‘RBS is the largest lender to SMEs in the UK,’ a spokesperson for the bank said in its defence.

‘We have established an independent review of our lending standards and practices to identify steps we can take to support even more SMEs, and play our part in securing the economic recovery. We encourage businesses to submit information to the review which is running throughout the summer.’

By the sounds of things, though, businesses will be doing thing of the sort, for fear of incurring the wrath of their bank - RBS or any other.

‘I want to tell people they are not alone and don’t need to be frightened,’ Tomlinson says, addressing small and medium businesses in the report.

 It really does make it sound like a reign of terror...

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