Getting back to business
As the dust begins to settle following publication of the competition commission report into banking services for SMEs, banks and customers must get back to doing business.
As of this month, the Business Banking Code is in operation with around 50 institutions signed up – the culmination of a year of rigorous consultation between banks, the major small business lobby groups and government departments, on how best to ensure that small businesses are treated fairly by their banks.
Over the last decade there have been significant changes taking place in the small business banking market.
The early part of the 1990s was characterised by high rates of business closure and the inevitable retrenchment by banks, the last few years have seen greater stability in the market, and improvements in the relationship between banks and their small business customers.v This is not to say that all is rosy, but businesses and banks now appear to understand and deal with problems. According to the Institute of Directors, 86% of businesses have never had a request for finance rejected by their banks and 91% have a good or acceptable relationship with their bank.
The Business Banking Code is targeted primarily at small business customers, and aims to build on the banking industry’s statement of principles. The code will empower the small firms that are the lifeblood of the UK economy to demand the same levels of accountability and transparency in their dealings with their banks to which we have now all become accustomed in our personal banking.
Over recent years small businesses have demonstrated a much closer relationship with their banks, through increases in borrowing and deposits.
The economic performance of the UK is dependent upon banks and small businesses maintaining a working relationship unencumbered by red-tape or regulation. The majority of SME finance comes from banks. Not to mention advice. The Small Business Service claims that 60% of small businesses use outside advice – the most popular sources being accountants and banks.
At the same time, over half fear the impact of regulation on their business.
Banks and businesses must work to preserve the equilibrium of their relationships.
The Business Banking Code aims to move the business of doing business to a new level of understanding and success.