Is accessing finance the main barrier to growth?
by Roger House, FSB chairman, Kent and Medway
At a recent Kent Economic Board meeting, I was surprised to
be delivering fairly upbeat results in our local business
But now, as we have amalgamated the national trend from our
surveys, we see a different result.
More than four in 10 (41%) small firms were refused finance from
high street banks as confidence dipped in the second quarter.
With the economy in recession, the FSB’s Small Business Index
measured 1.3, down 0.9 points from 2.2 in Q1 as firms continued to
feel pressure from rising overheads.
Despite the credit squeeze, more than 50 per cent of respondents
said they still plan to grow their businesses over the coming 12
But the proportion of firms looking to grow rapidly shrank from
10.9 per cent in Q1 to 7.2 per cent in Q2.
With one in five firms saying access to finance is the main
barrier to achieving growth aspirations, we believe the credit
squeeze will impair small businesses’ growth plans, reduce new job
creation and further set back the UK’s struggle to emerge from
The FSB has long called for more competition in the banking
sector and strongly believes small firms – which collectively
produce more than half Britain’s wealth (GDP) – will only be able
to access the reasonably-priced finance they need when there is
more competition in the banking sector.
Until and unless this happens, small firms and entrepreneurs’
growth aspirations, which have held up remarkably well over recent
years, may be crushed.
We have encouraged the Chancellor to ensure the proposals on
increasing competition laid out by the Independent Commission on
Banking are seen through in his Banking Reform White Paper, issued
Sector confidence: Of 17 industry sectors measured, confidence
fell in all but two. Confidence rose moderately in health and
social work related firms, as well as vehicle sales and maintenance
companies. All other sectors reported a fall with financial and
real estate services showing a dramatic decrease.
There were further sharp falls in retailing, leisure, sports and
entertainment, as well as hotels and the restaurant and bar
A moderate decline in confidence was reported in manufacturing,
IT and other business services.
UK and the South East: Reflecting the sharp decline in
confidence in key London industries – finance and property –
confidence levels in London remained in negative territory.
Confidence in the capital is now on par with Northern Ireland at
Businesses in Kent the South East Local Enterprise Partnership
(SELEP) area have shown greater levels of confidence than the UK as
a whole with 74% of respondents forecasting the same or increased
prospects in 2012.
This may be reflected in the higher proportion having
applications for bank funding approved. 48% of businesses covered
by SELEP had credit applications approved compared to 43%
If small firms cannot access credit it constrains their
We know from past research many small businesses missed growth
opportunities because they couldn’t access the money they needed.
There also needs to be more alternative sources of finance that
small firms can tap into.
This on-going credit squeeze is becoming critical.