PORTFOLIO: BUSINESS
In this section: 58 Supporting businesses | 59 Channel 4 innovation fund | News digest | 61 Opinion: Jeremy Peat |
Small matter
The big banks have been bailed out but what about the businesses they are supposed in turn to support,
asks William Peakin
S
hort of taking a baseball bat to the to a failure of communication between both householders and the high street –
desks of the banks’ chief execu- banks, their branch staff and their cus- but we all know the public sector alone
tives, one wonders what it will take to tomers. can only do so much.
get through to them about their side of Speaking after the first meeting of “I have written to the four big clear-
the bargain for being bailed out with tax- the Government’s new Small Business ing banks here in Scotland to urge them
payers’ money for imperilling the world Finance Forum, he said the five banks to explore all possible ways they can help
economy with their reckless practices. – HSBC, Barclays, Lloyds TSB, Royal businesses. In particular, I hope they
They were told not to leave business Bank of Scotland and HBOS – would grasp the substantial opportunities pro-
hanging out to dry, but the evidence is hand over the market-sensitive data to vided by the resources made available
that is exactly what is happening. From the Government to enable officials to by the EIB to assist the banks with SME
US bankers caught on tape telling their present findings to the forum when it lending and pass the benefits on to their
employees that the government’s money
The l
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ast
meets again next month. The banks customers.”
now provided them with opportunities
thing small
have also agreed to rewrite their volun- Small business is, on the other hand,
to buy faltering financial institutions, to tary code of conduct towards their small taking the initiative; adopting approaches
HBOS employees guffawing at an after-
businesses
business customers for the second time that could help them weather the storm.
dinner comedian joking about people
should do is
this year. They are being supported by the Federa-
losing their homes, there is a sense that cut prices In Scotland, Cabinet Secretary John tion of Small Businesses (FSB) which, in
something is not quite right.
through
Swinney urged the main banks to speed addition to issuing practical advice and
Many small to medium-sized busi-
panic
up efforts to help smaller businesses lobbying the Government, earlier this
nesses are being told by their banks that across Scotland to survive the downturn. month appointed a professor of small
their credit facilities are being withdrawn In a letter to RBS, HBOS, Lloyds TSB business. The initiative, begun last sum-
or rearranged, for a fee, at a higher rate
null
and Clydesdale Bank, he said banks mer before the credit crunch had fully
of interest even when the firms’ cash- should use resources made available by hit home, has proved timely.
flow is strong. Small business organisa- the European Investment Bank (EIB) to Alistair Anderson, professor and
tions say that there is a great deal of mis- help them with lending to SMEs. “Small director of the Centre for Entrepreneur-
trust: branch managers are scared about and medium-sized businesses are consis- ship at Aberdeen Business School, Rob-
the implications of lending and small tently telling me that access to finance is ert Gordon University, was announced
businesses are fearful of talking to their one of the biggest challenges they face as the FSB’s official Professor of Small
bank manager. in the current climate,” he said. “The Business at the FSB National Council
Last week, the Governments in Scottish Government has put in place a in London. The FSB has more than
London and Edinburgh were forced to six-point economic recovery plan to help 215,000 members across the UK and
remind the banks, again, that they had a around 20,000 in Scotland. Scottish
duty to support business. SMEs account for 95 per cent of enter-
The five main small business banks
>> Valuable insight
prises and 53 per cent of private sector
have agreed to direct government moni- “One of our PhD students had been interested in whether an employment.
toring of their lending activities. The
ancient Greek idea, Aristotle’s theory of value, had any relevance
“My advice to entrepreneurs and
banks, which control almost 90 per cent
for modern small business. Aristotle has proposed that purpose,
small firm owners in the current climate
of the £53 billion market, will disclose
doing things well, was an ideal that we should all strive to
is: don’t be overwhelmed, take practical
achieve. We studied a number of businesses, applying these
how much money they make available to
ancient ideas in a modern format. We found that two Aberdeen
steps,” said Anderson. “The last thing
small firms, their assessment of the risk
firms had a very strong sense of purpose, of doing things well
small businesses should do is cut prices
attached to that lending and how much
for its own sake, rather than focusing only on profits. One con-
through panic. A simple five or 10 per
it costs them to raise the funds. centrated on technological excellence, the other on customer cent reduction in price can lead to an
Lord Mandelson, the Business
service. We found that their staff turnover was low, staff and
80 per cent reduction in profits. Keep
Secretary, said the Government had
customers were very satisfied. Remarkably, their profits were
watching your cash flow, get to know
to establish whether banks were con-
also significantly better.”
your bank manager and give your cus-
sciously withdrawing credit, re-pricing
- Professor Alistair Anderson, FSB Professor, Director of the Centre
tomers value in the way that only small
existing facilities and acting “in a rather
for Entrepreneurship, Aberdeen Business School, Robert Gordon
businesses can.”
arbitrary way” or whether the problems University. In an interview with Holyrood last
experienced by small firms were down week, Anderson outlined his approach to
58
| 17 November 2008 | Holyrood magazine | www.holyrood.com |
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