Will the government be able to make banks keep lending?
There has been a breakthrough, of sorts, in the battle to get banks to increase lending to small businesses. Business secretary Peter Mandelson this week announced the launch of a new panel that will “monitor how banks are lending” to small businesses. This is how it will work: the five high street banks – namely HSBC, Barclays, Lloyds TSB, Royal Bank of Scotland (NatWest) and Halifax Bank of Scotland – have agreed to provide the Government with data on the availability, risk and cost of lending to small and medium-sized businesses. The Department for Business, Enterprise and Regulatory Reform says the panel – which will consist of senior DBERR and Treasury officials as well as representatives of the Bank of England – will “monitor [SME lending] and enter into a constructive dialogue with individual lenders”.
It sounds promising enough – any attempts by Government to increase lending to small businesses will be welcomed by insurance brokers who fear that hard up companies may decide to reduce costs by cutting back on their insurance spend. However, there is a concern that the monitoring panel may be, in reality, pretty toothless. To begin with, the panel is only monitoring the scale of lending to small businesses, rather than forcing banks to increase lending. In addition, it’s worth noting the comments Mandelson made when the panel was launched. He said: “I want this Forum to make a difference – we have opened up a dialogue between SMEs and banks, and we will continue to work together to make sure we have the resources in place to see UK plc through this difficult economic climate.” The fact that Mandelson said he “wants” the Forum to make a difference gives the impression that he’s not making a cast-iron guarantee that it will. Meanwhile, mention of having “opened up a dialogue” makes it sound like the whole arrangement will merely be an opportunity for a number of very influential people to expel hot air.
Let’s hope that the panel is not just a talking shop. With the future of many small businesses – and their insurance brokers – on the line, now is the time for action.
