The Survey by the Institute of Financial Accountants (IFA), which was released on 24th June at a launch ceremony in London’s BIS Conference Centre, canvassed the opinions of IFA members; we currently have over 10,000 strong members.
Questions focused on the plight of small businesses in post-recession UK. The challenges businesses claim to be facing include:
- Attracting new business/clients;
- Finding and affording good staff;
- Rising taxes;
- HMRC bureaucracy and poor service, online and by telephone, taking up non-chargeable time;
- Competition from companies providing extremely low quotes;
- Finding lenders – banks frequently refuse reasonable lending applications.
George Derbyshire from National Federation of Enterprise Agencies and guest speaker at our recent Business Barometer Launch said:
“There is no question that a thriving small business sector will be central to economic recovery, and the IFA and its members are uniquely well-placed to test the temperature of the sector. The findings of the Barometer Survey provides an agenda not only for the Government, but for all of us who work to support small businesses.”
IFA members were asked what their experience was of the willingness of banks to lend. Only 2.6% said they were ‘very willing’. Whereas almost 37% said they were unwilling and a resounding 25% claimed to be ‘very unwilling’.
I think the general feeling is that banks are too risk averse. They are not flexible and SMEs are finding it almost impossible to obtain credit. When banks do lend, it is always accompanied by strict personal guarantees, excessive charges, bigger deposits, and shorter loan periods.
Peter Ibbetson, Chairman of Small Business Banking at RBS and NatWest, also spoke at the recent launch event and had this to say:
“We are committed to supporting UK businesses and as part of our partnership with IFA we are launching a number of locally based workshops up and down the country. This will ensure we continue to work closely with the Institute and give its members every opportunity to discuss access to finance with our local business managers. It's this positive approach that has helped the Bank extend £10.4 billion of new facilities and approve over 85% of credit applications to UK businesses in the first quarter of this year."
There is, however, a strong belief that this situation could change, with 73% of IFA respondents agreeing that more could be done to improve availability of and access to credit.
Small businesses are calling for Government-backed guaranteed lending, National Insurance breaks, matching funds for businesses taking on unemployed people and supplements provided for training.
Phil Orford, Chief Executive of Forum of Private Business commented on the survey:
“Without the ability to maintain a healthy cash flow you don’t have a business at all, alongside rising taxes and the cost of complying with legislation, banks are still reluctant to make affordable credit available to many SMEs and this is a major barrier to their survival and growth.”
However, almost a third of IFA members claimed to be optimistic about the future of business, with 27% believing that ‘things will improve somewhat’ over the next 12 months. Around 26% of members thought there would probably be no change, with just under 25% expecting ‘things to get a little worse’.
As the Financial Management Professional for SMEs and with the finger on the pulse of the financial industry, the IFA is doing everything it can to help its members, most of whom are struggling following the recession.
IFA members and fellows working in SMPs (Small and Medium Practices) are particularly well placed to understand and meet the needs of SME businesses.
David Woodgate is chief executive of the IFA and a barrister by training. Before joining the IFA he was chief executive of the Institute of Administrative Management and held senior management positions in the City with organisations including Royal Bank of Scotland and NatWest.
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