Businesses’ Trust in Banks Declines
A survey by the British Chambers of Commerce (BCC) has found that small businesses’ trust in the banking system has declined.
The survey, conducted in mid-September and released today, asked 1,560 businesses their thoughts on access to business finance.
The breakdown of the results showed that exactly half of those firms polled (50%) said that they mistrusted banks and building societies whist 38% of businesses indicated that they trusted the financial institutions less than they did a year ago.
When it came to business finance, 49% of businesses were using banks or building societies as their main source of external finance, 10% of firms were using equity and 8% were relying on business grants, venture capital, private equity, peer-to-peer lending and/or business angels.
Asked about their confidence in lending, a little over half of the firms questioned (57%) said that they were confident of securing external finance whilst 37% were not at all confident in doing so.
However, the BCC’s findings showed that 43% of businesses were unaware of these government-backed schemes – Younger businesses and micro firms (those with fewer than 10 employees) were the most likely to be unaware of the schemes.
The BCC did welcome the Government’s announcement in late September about a British Business Bank, which is not expected to strictly be a bank in the traditional sense, but an "umbrella organisation" bringing all the state-backed initiatives under one roof. 59% of businesses polled said that a Government-backed business bank would give them more confidence in the system.
The BCC’s Director general, John Longworth, was critical of a perception of politics over economics, saying:
“As we approach the end of the party conference season, Britain’s politicians must stop scoring points against each other and start scoring points for economic management, starting with the thorny problem of business access to finance.”
Longworth went on to acknowledge the levels of mistrust and identify a number of issues that damaged the trust factor:
“Our new research clearly identifies the scale of the problem: half the companies we surveyed mistrust banks, and levels of trust have worsened significantly over the last year. Four in ten companies are not confident that they could get external finance.
And awareness and take-up of existing government support schemes, which are run through the banks, is extremely low, with the recent LIBOR and mis-selling scandals damaging confidence among businesses.”
Longworth concluded his commentary with an attack on the notion that big business is getting more of the political parties’ attention, adding:
“Political leaders always seek to woo the favour of corporate Britain. But the next election will be won or lost on what happens in the real economy. Our findings suggest that the parties need to focus on access to finance for Britain’s army of small- and medium-sized companies, and particularly new and growing companies, if they are to win the votes of Britain’s wealth creators, and the people who work in business, in years to come.”
This parting comment echoes the recent reports that small business is trusted more than big business to get the economy going again.