ACCA (the Association of Chartered Certified Accountants) has given a cautious welcome to Vince Cable’s plans for a Business Bank, announced today.
Policy-wise, ACCA believes that a long-term view needs to be taken in this instance. Manos Schizas, Senior Economic Analyst at ACCA, explains: 'Politicians can only make the landscape for small business finance work better by agreeing on a long-term industrial policy that will survive the politics of the coming years and outlive future parliamentary terms. The global accountancy body knows this is a big ask, but stresses that, without this level of consistency over time, small and medium sized enterprises (SMEs) in the UK are unlikely to see any benefit.'
Manos Schizas adds: 'We’ve had the Rowlands Review of Growth Capital in 2009, Financing a Private Sector Recovery in 2010, the Breedon Review earlier this year, not to mention a host of initiatives from the Enterprise Finance Guarantee and the Working Capital Guarantee first launched in 2009, to Project Merlin last year, to the National Loan Guarantee Scheme (NLGS) and the BoE’s more promising Funding for Lending scheme this year. All well-intentioned, many of them well designed. Yet despite these policy moves, lending to business has still not recovered.'
Independent evidence from the SME Finance Monitor, the definitive record of SME access to finance in the UK, shows that levels of awareness of such schemes among SMEs have been persistently low and show little sign of improving in the short term. ACCA believes that this is normal: building an overarching brand in small business lending, ACCA notes, will take decades rather than months.
Small business banking at a crossroads
ACCA also believes that any long-term business finance strategy will need to be built around the new realities of financial regulation. In particular, ACCA believes that the combination of the Independent Banking Commission’s (IBC) proposals and new capital and liquidity requirements under CRD IV places very significant restrictions on how lending to businesses, especially SMEs, can work in the future.
Manos Schizas continues: 'Regulations are increasingly pushing banks to separate the origination of small business loans from the act of carrying small business credit risk. A lot of new players are already carving out their niches in this new landscape as either originators or carriers; Government too needs to know where it fits.'
He adds: 'It’s time for this Government, and anyone hoping to be in government in the next thirty years, to sit down – preferably together – and think hard about where this agenda is going.'
The challenge for the accountancy profession
The Government is not alone in its efforts to improve business’ access to finance, ACCA noted. The latest SME Finance Monitor has demonstrated businesses that produce regular management accounts and have appropriately trained people in charge of their finances are more likely to be successful when applying for new loans and overdrafts – there’s even a strong hint that taking advice prior to applying can improve their chances of successful funding.
Manos Schizas concludes: 'The profession has a lot to offer this agenda and we are pleased to be working with Government to ensure that, in future, UK businesses have access to the business support infrastructure to match any new lending initiatives.'