More than half of UK SMEs do not feel supported by their banks
More than half of small and medium enterprises in the UK do not feel their banks are being business-friendly or offering enough support, according to a new survey.
The survey of 850 SMEs, by business loan specialist LDF, found that 52% of respondents were not happy with the support provided by their business banking providers.
Almost a third (30%) said that gaining access to finance was the single biggest difficulty when they were setting up their business and around a quarter complained of too much red tape from their bank. One in ten also said that financial ‘blocks’ had almost led to them closing down.
The survey comes in the wake of Natwest and the Royal Bank of Scotland (RBS) writing to business customers to warn that they might start charging to hold deposits due to low interest rates. If they did so, it would make them the first UK banks to introduce negative interest rates.
UK interest rates have been held at a record low of 0.5% by the Bank of England since March 2009 – the height of the financial crisis.
Governor Mark Carney has said it is likely that some monetary policy easing will be required to boost the UK economy in the wake of the EU referendum result and some economists fear this may mean cutting the base rate to less than zero.
In 2014, the European Central Bank became the first major central bank to introduce negative interest rates. The aim is to encourage banks to lend to businesses rather than stockpiling money.
A report from BI Intelligence suggests that the current climate could be good news for challenger banks, adding that businesses facing financial difficulty should consider the alternative finance options that may be available to them.
Challenger banks typically offer substantially higher interest rates than legacy banks and this difference could be far more marked if challenger banks retain small positive rates while legacy banks slip into negative interest, effectively charging customers to hold deposits.
In the US, the report estimates that alternative lenders will have a 20.7% share of the small business lending market by 2020.
By Phil Smith