I am absolutely delighted that the Treasury Select Committee has agreed to pursue an inquiry into the availability of SME lending facilities, and I am grateful to the Chairman, Andrew Tyrie, for taking this forward.
As Sir Andrew Large highlighted in his recent report into RBS, fixing SME lending in the aftermath of the financial crash is vital. In 2000, there were 41 major British banking groups and subsidiaries, whereas in 2010 there were just 22. In the last quarter of 2010, lending to the SME sector dropped by 38 per cent from the last quarter of 2008. Five banks have an almost 90 per cent market share of the personal current account and SME lending market, and there is plenty of evidence to suggest that these enormously concentrated market shares are creating huge pressure for SMEs. There is evidently a need for genuinely comprehensive action to increase competition in the domestic banking market in Britain.
One significant step in the right direction would be to take the opportunity to sell off the state-owned banks, as the Governor of the Bank of England himself has previously suggested. Selling off the taxpayer-owned banks in small parcels would instantly create potential new challenger banks, and I continue to urge the Government to consider doing so.
There is also the issue of multiple outdated legacy systems within banks which makes it hard for them to evaluate good business ideas versus good collateral, and better and new systems would enable them to make better lending decisions to SMEs.
So I welcome the move by the TSC to hold an inquiry into access to SME finance, considering why the market hasn’t filled the gap, and looking at the remit of the regulators and the effectiveness of banks’ existing complaints and appeals procedures.
I look forward to exploring with colleagues how we can bring about lasting change for our SMEs to help them to be more globally competitive.