Vince Cable on banks: "I don't think they get it"

"I DON'T think they get it" – that's the verdict of Business Secretary Vince Cable on the attitude of banks when it comes to lending.

More than a year ago, Derbyshire businesses seeking a loan were complaining that they were not "getting it" either.

When the banks did show willing, the amount of interest they demanded turned off a lot of those firms.

Fast forward to the present day and little appears to have changed.

A report published by the Institute of Directors says that companies are still finding it hard to obtain finance.

One in three firms which applied for finance between January and June was turned down by its bank.

And 37 per cent said they had noticed an increase in the amount of security being requested against any lending. This is higher than the 29 per cent figure in a previous IoD survey covering the final six months of last year.

Such figures have prompted Mr Cable to accuse the banks of failing to act in the national interest.

His concerns are shared by Ron Lynch, the IoD's East Midlands regional director, covering Derbyshire.

He said: "We're concerned that access to finance for businesses in the region remains difficult. We remain convinced that the best way to improve access to finance in the longer term is getting a lot more competition into the banking sector.

"Only when firms can choose more easily where they can place their business and switch banks will we have a banking sector that is better focused on the needs of business customers."

About 18 months ago, Paul Wood, who runs Pride Park accountants Book Keeping Plus, was struggling to get a loan. One bank quoted him an interest rate of 20.5 per cent.

He said: "I eventually managed to secure a loan but only when the bank realised I had to get one in order to pay my overdraft.

"I strongly feel that there needs to be more regulation of the banks.

"The feedback I'm getting from my clients is that it is still very difficult to get finance and they are having to jump through a lot more hoops to get the cash."

But John Dowson, head of policy and representation at Derbyshire and Nottinghamshire Chamber, said banks were faced with a "no win" situation.

"We would all be the first to criticise if banks started investing in risky ventures because that is how the financial crisis started," he said.

"We have recent anecdotal evidence from our members that lending is improving."

Indeed, there have been some sizeable deals happen in Derbyshire so far this year, which have benefited from the support of the banks.

Lloyds TSB Commercial provided a lending package that included funding under the Government-backed Enterprise Finance Guarantee to help Richard Pope buy the Bull's Head pub at Repton from Punch Taverns.

More recently, the same bank provided cash to help distribution company Sert-MST open new headquarters in Swadlincote, creating 100 jobs.

HSBC has helped fund at least two major deals involving Derbyshire business so far this year.

It backed the £32.8 million management buyout of Derby communications firm TTG and was involved in a deal which saw Denby-based hand-cleaning products firm Deb Group changing hands.

And engineering firm Paul Fabrications was able to expand its Castle Donington site, thanks to a loan from NatWest Business Banking.

John Bickers, director of business and commercial banking for NatWest and RBS, based in Derwent Street, Derby, defended the lending record of his team.

He said: "We are very much open for business and are currently approving 85 per cent of all business applications for credit.

"We are providing new loans to over 5,000 businesses a week nationally and are actively stepping in to support our customers.

"We are also leading the field in taking applications for the Enterprise Finance Guarantee scheme, with over £365 million worth of loans already drawn nationally and approaching a total of £400 million of loans offered."

Mr Bickers also argues that the demand for lending has reduced compared to 12 months ago, a view that is backed up by the British Bankers' Association.

He said: "Many companies are looking to reduce their debts rather than increase them. Our own survey of small and medium-sized businesses shows that only 18 per cent are looking to increase borrowing, when 20 per cent are looking to reduce."

But this cuts little ice with Derbyshire Euro-MP Glenis Willmott.

She said: "Companies across Derbyshire continue to struggle to access credit which is needed to keep their business going and even to expand.

"Last year, British banks paid themselves an extra £10 billion in bonuses. This is money which could have been used in our real economy."

MEPs in Strasbourg recently agreed rules to limit the amount of cash that can be paid up front to bankers, so that money can be reclaimed when things go wrong.

It is hoped the new laws, due to be implemented in time for the upcoming bonus season in January, will put a stop to the high-risk, short-term banking culture which was the main cause of the financial crisis.

Ms Willmott said: "At a time when the Government is making substantial cuts to public services and reducing support to families and businesses, my constituents expect banks to play a part."