UK SMEs are still struggling to get access to finance

Smaller firms are struggling to access finance despite Government attempts to encourage lending, ministers have been told

Spending chiefs have urged the creation of a new £200m fund to help SMEs

Smaller firms are struggling to access finance despite Government attempts to encourage lending, ministers have been told.

A report by a committee of MPs said the Treasury and the Business Department had not done enough to raise awareness among small and medium-sized enterprises (SMEs) of the financing options available to them.

The departments cannot demonstrate the success of schemes, even though almost £3bn of financial support will be given from 2011/12 to 2014/15, said the Public Accounts Committee. Margaret Hodge, who chairs the committee, said: “Small and medium-sized enterprises have a vital role to play in driving the UK’s economic recovery, but despite Government attempts to encourage lending to SMEs, many still struggle to access the finance they need.

“At the time of our hearing, overall lending to SMEs was down.

“Net lending by banks participating in the Funding for Lending scheme has declined by £2.3bn since the scheme was launched, and the number and value of loans backed by the Enterprise Finance Guarantee fell each year between 2010 and 2013.

“Departments manage their various schemes not as a coherent programme but simply as a series of ad hoc initiatives.

“There is no common understanding about which parts of the SME sector are generating the most growth and where government support would do most good.

“Departments were therefore unable to demonstrate that they are achieving best value for taxpayers’ money.” The MPs recommended that the establishment of the British Business Bank should be used to manage schemes as a coherent programme.

John Allan, chairman of the Federation of Small Businesses, said: “Recent FSB research shows hundreds of schemes available to support small and medium-sized businesses, but no clear mechanism for evaluation, co-ordination or communication either at the national or local level.

“At the central government level, the FSB agrees the British Business Bank should be the mechanism to simplify existing Government lending schemes and believes it should also provide information about alternative lending to small firms.’’

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