Michael Fallon urges banks not to let small businesses down
This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
The government has today published new data detailing lending by specific banks through the Enterprise Finance Guarantee scheme.
For the first time, this provides a breakdown by individual lenders, allowing businesses to identify which banks are making most use of government assistance to increase access to finance.
Business Minister Michael Fallon wrote to the Chief Executives of the five main high street banks in September to encourage them to increase their use of the Enterprise Finance Guarantee (EFG) scheme as lending levels have been disappointing since peaking in 2009. This was despite the government, in partnership with the banks, making a number of changes to the scheme to make it more flexible and easier to access.
Michael Fallon said:
It is crucial that banks play their part in making finance available to businesses and support growth in the economy. Banks have to lend responsibly but it is clear that a number of lenders need to up their game.
The EFG scheme has been made more flexible and is now available to even more businesses. Publishing lending data should encourage these financial institutions to do more to help business thrive.
By being more transparent on lending figures, the government is giving SMEs the information to best secure the finance they need to grow their business. It also enables new market entrants to identify opportunities and drive improved competition and choice.
The EFG scheme allows banks to extend lending to small and medium-sized enterprises (SMEs) by providing a government guarantee which allows banks to lend to businesses which otherwise lack the security or track record for a standard commercial loan. Access to finance is a crucial issue for SMEs, and over the past year the government and the banks have worked together to make a number of changes to the EFG scheme to widen its availability.
However, despite these changes the level of lending through the EFG scheme for this financial year is forecast to be broadly equal to last year. The government has made £500m available for guarantees for 2012-13 but EFG lending is expected to be only £315m.
Notes to editors:
The value of EFG loans drawn over the past 5 years is as follows:
The number of EFG loans drawn over the past five years is as follows:
- The changes the government has made to the EFG scheme over the past year include:
- Increasing the turnover limit from £25 million to £41 million
- Replacing the £1 million per business lifetime scheme limit with a rolling £1 million outstanding limit
- Raised the level from 13 per cent to 20 per cent of the lenders annual lending portfolio to which the Government guarantee applies
The full data is available with the Written Ministerial Statement.
- The government’s economic policy objective is to achieve ‘strong, sustainable and balanced growth that is more evenly shared across the country and between industries’. It set four ambitions in the ‘Plan for Growth’ (PDF 1.7MB), published at Budget 2011:
- To create the most competitive tax system in the G20
- To make the UK the best place in Europe to start, finance and grow a business
- To encourage investment and exports as a route to a more balanced economy
- To create a more educated workforce that is the most flexible in Europe.
- Work is underway across government to achieve these ambitions, including progress on more than 250 measures as part of the Growth Review. Developing an Industrial Strategy gives new impetus to this work by providing businesses, investors and the public with more clarity about the long-term direction in which the government wants the economy to travel.