15th Nov 2012
A war of words has broken out between the British Bankers' Association and small business representatives over comments made about small business lending.
The Federation of Small Businesses (FSB) has accused chief executive of the British Bankers’ Association (BBA) Anthony Browne of being "short-sighted" over remarks he made in an article in City AM, in which he stated that the reason banks aren’t lending to small firms is because there is a lack of demand for finance from SMEs.
"Over the past year, the number [of SMEs] wanting loans or overdrafts has dropped by about a fifth. The trend is similar in the number of SMEs that actually apply for these products. Approval rates have stayed roughly stable, but fewer applications inevitably means lower lending."
Browne also disputed the fact that banks’ refusal to lend to small firms is undermining the economy.
"Over the past year, just 1.5% of all SMEs had a loan rejected. Whatever problems the other 98.5% had, it wasn’t caused by a lack of lending," he remarked.
However, the FSB has reacted angrily to the comments, accusing Browne of debating old issues.
The article has prompted Graeme Fisher, head of policy at the FSB, to write a letter to City AM, which has been seen by BusinessZone.co.uk. In it, Fisher wrote:
"The argument about small business lending and supply or demand is stale. In his early days in post, we would have hoped that chief executive of the British Bankers Association would have shifted the debate onto more fertile ground.
"It is misleading when Browne says only 1.5% of small firms have been rejected loans by his member banks. According to the survey which the banks sponsor, a third of all loans applications and a fifth of all overdraft applications were declined. Issuing inappropriate statistics does little to boost confidence and ultimately leads to bad policy making."