Bank Of England Say SME Lending Reached £1.3bn In Previous Quarter
The Competition and Markets Authority is set to launch an investigation into the UK's small business lending system.
Coalition ministers in both the Liberal Democrat and Conservative parties have regularly criticised the banking sector for its poor record on lending to SMEs, despite counter-arguments that not enough applications are being made and research which demonstrates high approval levels on loans.
Many large banks have also complained they are being asked by the government to back SMEs on a "no-matter-what" basis, which they claim could potentially put the UK at risk of another credit crisis.
But despite this, business secretary Vince Cable last night described the poor performance of the government's Funding for Lending scheme, which encourages banks to lend to small firms, as "utterly perverse", according to the Independent.
Recent figures from the Bank of England show that lending to SMEs fell by £1.3 billion between the second and fourth quarters of 2013.
In an attempt to establish what can be done to create a fairer system that benefits both the UK public, banks and small business community, the Competition and Markets Authority will launch its first investigation since being created.
This will take over from a study already underway by the Office of Fair Trading, which - alongside the Competition Commission - has been dissolved to make way for the new authority.
Earlier this year it was revealed that banks are substantially more likely to provide funding to small businesses than they think.
Only 37 per cent of SMEs surveyed by the British Bankers' Association (BBA) thought they would get approval if they asked for a loan, but more than two-thirds actually have theirs approved.
"Banks are open for business," BBA boss Anthony Browne told the BBC in January 2014.
To further advertise the lending services offered by large banks, the BBA has launched a campaign to raise awareness about funding that financial firms could offer to SMEs.
Expert Opinion
SMEs are the lifeblood of the UK economy and it is vital that business owners receive the necessary financial support they need in order to realise their ambitions. <br/> <br/>“The banking community has been criticised previously, but there are signs of significant improvement and this should certainly be acknowledged and welcomed. <br/> <br/>“Small businesses have a range of traditional and non-traditional funding options available to them and as the economy continues to show signs of improvement, it is vital that SMEs understand and explore all of them.” <br/> Steven Beahan - Partner