Roger House, CEO of The Centre was delighted to be at the Federation of Small Business annual dinner (as a member of the National Policy Committee and Kent Regional Chairman) where both The Chancellor and the Business Secretary spoke to guests. In his final speech as National Chairman, John Walker informed us all that during what had been a momentous week for the banking sector, he on behalf of the FSB was “Pleased reforms to the sector seem to be moving in the right direction. Small firms have felt these practices more than most, in a lack of lending and the appalling mis-selling saga which hit many of them. The FSB is pleased that both the Chancellor and the Business Secretary have acknowledged the problems that small firms have faced at the hands of the banks”.

The drought of finance from what the Chancellor called ‘an oligopoly in the banking sector’ made clear what we have been saying for some time – that there must be more stability and competition in the sector if small firms are to get the finance they need.

The reforms laid out in the Banking Reform Bill will go some way to achieving this. However, stability and competition are not mutually exclusive. Competition needs to come from more banks on the high street providing genuine choice for small firms and so we welcome the moves to open up payment services to make it easier for new banks to start and those small players to grow.

This in turn will create a more stable environment, and when combined with the ringfence to secure the day-to-day operations mean that small firms will be able to keep running without fear. The Business Bank, which the Business Secretary touched on also has a role in opening up non-bank finance to improve competition, but also helping small firms access finance which isn’t readily available from the banks.

The FSA’s pilot redress scheme highlighted the severity of mis-selling with more than 90 per cent of complaints being upheld. This is a shocking figure and it is now up to the banks to make sure they give appropriate redress to those businesses that have been affected.

We have heard first hand from members who have lost their life-times work because of these sharp practices and hope that now we can start to draw a line under this episode. However, we are fearful that without the immediate suspension of payments when a business enters into the redress process that some small firms may find themselves in trouble.

Vince Cable talked about the many contradictory signals that were being thrown up in the economy. He expressed delight that employment was up and that we have seen some rapid employment growth. He referred to a growth of entrepreneurial activity and took this as an indication that people were prepared to take more risks (those of us in business that is). He went on to say that “Government is fixing the plumbing of the financial system but the problem is that there is no water flowing from the pipes”. One has to pose the question, are the plumbers sufficiently trained for the job?

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