It is widely believed that it is the small and medium sized (SME) businesses community that will provide the drive and momentum that will eventually lead the country out of the current recessionary period. For that reason it is pleasing to see some positive news emanating from this most crucial sector.
According to the latest British Bankers’ Association figures, lending to small businesses by the high street banks rose by £153 million in May. During the same period over 45,000 new small businesses banking relationships were established, while deposits from small businesses rose by £250 million.
Commenting on the data, BBA statistics director, David Dooks, said: “The small business sector saw another monthly increase in its borrowing from the high street banks in May, while reduced trading activities and greater control of liquidity were reflected in increased deposits and little changed overdraft levels. Through the economic downturn, banks are working to support small businesses.”
Help is also welcome from outside of the UK. The European Investment Bank (EIB) has signed a £100 million deal with the Abbey Group in the latest stage of its support programme for UK SME sector. Under the deal, Abbey will borrow £100 million from the EIB to benefit smaller firms across a wide range of economic sectors.
SMEs should start to benefit from EIB finance early in the third quarter of 2009. Steve Pateman, Executive Director for Abbey Corporate and Commercial Banking, said: “We are pleased to be working with the EIB as we seek to build a business that supports the growth of SMEs within the UK; businesses that will play a key part in helping the UK economy move forward.”
On the product front Investec Private Bank has announced that through the launch of a new
savings offering, it intends to increase dramatically the amount of money it has on deposit from UK businesses. By assessing the competition provided by other providers in the market, and setting the rate accordingly, the new Investec Business High 5 Account will pay a market leading rate every week. As well as being assured of one of the best rates available, businesses also have the added benefit that the rate is set independently.
In a move more reminiscent of that usually seen in the personal finance market, Unity Trust Bank is offering to pay £100 to any business customer who decides to leave after one year, for service related reasons. This new service commitment follows its announcement to remove all penalty charges and penalty interest on unauthorised overdrafts from the start of this year.
As with most news of a positive nature it has to be tempered somewhat as although conditions are expected to stabilise in the months ahead, the concerns for businesses remain. With reduced cash flow still a major concern, and some poorly implemented government initiatives still working their way into the system, the industry still has some way to go yet before it reaches safety.
