SMEs ‘still not getting help’ on loan schemes

Lawrence Tomlinson’s report on RBS lending found there was evidence it had let some small businesses default

Small and medium-sized businesses are still struggling because the Government is not providing them with enough information on how they can access much-needed funding, according to MPs.

A report by the Public Accounts Committee also said claims by the Treasury and Business departments that they are helping SMEs as the economy recovers cannot be supported with evidence.

The committee’s chairman, Margaret Hodge, said: “Small and medium-sized enterprises have a vital role to play in driving the UK’s economic recovery, but despite Government attempts to encourage lending to SMEs many still struggle to access the finance they need. Departments manage their various schemes not as a coherent programme but simply as a series of ad hoc initiatives.

“There is no common understanding about which parts of the SME sector are generating the most growth and where government support would do most good. Departments were therefore unable to demonstrate that they are achieving best value for taxpayers’ money.”

The committee has recommended that interested government departments should work together with the new British Business Bank to bring the various schemes together.

The bank will open for business later this year with £1bn available for lending, and the committee called on the Government to use the bank to “set out what it wants to achieve, and how each scheme and the programme as a whole will contribute towards the overall objective of making it easier for SMEs to access the finance they need”.

It also pointed out that net lending by banks participating in the Bank of England’s Funding for Lending scheme had actually fallen – by £2.3bn – since the scheme was launched, and the value of loans backed by the Enterprise Finance Guarantee had fallen each year between 2010 and 2013.

Royal Bank of Scotland has already been criticised over its lending to SMEs. The state-backed bank was accused of forcing viable small businesses to close in order for its restructuring division to make a profit. Two reports were published into RBS lending practices.

The first, commissioned by RBS and written by Sir Andrew Large, found there were serious allegations to be tackled by the bank. The second, by Lawrence Tomlinson and set up by the Business Secretary, Vince Cable, said there was evidence the bank had put some businesses into default to make money.RBS has since appointed Clifford Chance to investigate the allegations.