Banks are among the biggest blocks to the growth of small businesses, the Federation of Small Businesses' (FSB) biennial survey of sector trends has revealed.
The FSB analysis of around 8,700 members, titled Putting the Economy Back on Track: Business Support and Finance, identified banks as key to getting financial support. But they also went on to name banks as one of the biggest barriers to their growth because of difficulties accessing credit.
The findings revealed that small businesses thrive on personal relationships for advice in areas such as starting up; recruitment; marketing and product development, compared with the last member survey in 2006. The number of members who consulted their customers leapt from 15 per cent to 80 per cent this year. Around three quarters said they relied on informal sources of support, such as other businesses, personal advisors, suppliers and family, compared with around 17 per cent last year.
Meanwhile, the statistics showed that those who have used banks or the Government as a source of advice have been dissatisfied with the service and described access to finance as a significant barrier to their growth.
Dr Gary Packham, an author of the report and Head of Enterprise at the University of Glamorgan, where the report was compiled, said:
"These findings illustrate that action must be taken immediately for small businesses to gain access to vital funds to ensure their growth and survival. People often do not realise that small businesses are the backbone of the economy, employing 13.5 million people and contributing over 50 per cent to UK turnover, therefore it is vital that this sector is given the necessary support and backed up by fair and flexible credit."
Following the Bank of England Monetary Policy Committee's 1.5 per cent cut in interest rates, the FSB is calling on banks to pass on this reduction so small firms feel the benefit to save them money and help them with their cashflow.
New sources of finance should also be considered. The FSB wants to see the Government in addition to the banks applying for money from the European Investment Bank.
John Walker, FSB National Policy Chairman, said:
"Our survey shows that small businesses thrive on personal relationships when seeking support such as marketing, recruitment and access to finance. However, there is evidence that new and growing firms, which require finance from their banks, are experiencing barriers to accessing funds and therefore not getting the same sort of close contact with their banks.
"We would like to see the first meeting of the new Small Business Finance Forum next Tuesday to call branch managers to account to ensure that they do more to show how they can support small businesses. The first step to help this crucial sector could be to immediately pass on the recent cut in interest rates which could save small businesses £750 million and help get the economy back on track."
Notes to Editors
1. The FSB has over 215,000 members and exists to protect and promote the interests of the self-employed, and all those who run their own business. More information is available at www.fsb.org.uk.
2. The report, Putting the Economy Back on Track: Business Support and Finance, is written by Professor David Smallbone and Dr Gary Packham. It is based on the results of the fifth biennial survey of the FSB membership. Data was collected by postal and email questionnaires in March 2008. Responses were received from 8,742 FSB members drawn from all regions of the UK. To view the document email email@example.com or visit www.fsb.org.uk
3. The FSB recently proposed a Small Business Survival Package which is composed of, a new £1billion fund as a stop-gap to tide small businesses over by reforming the Small Firms Loan Guarantee scheme; The FSB also proposes EIB funds are purchased by the Government and distributed through Regional Development Agencies, rather than solely relying on banks; The FSB also wants to see a simplified and well advertised process for public procurement and for big businesses which fail to pay their bills on time to be named, shamed and fined. For more information, please visit www.fsb.org.uk
Stephen Alambritis: 020 7592 8112 / 07788 422155
Sophie Kummer: 020 7592 8128/07917628998
Prue Watson 020 7592 8121 / 07825 125695
Marc Shoffman 020 7592 8113 / 07595 067068
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