Government cash unlikely to steady small business finance nerves

PA 332/11

Government plans to boost the finances of small businesses have been met with a wave of apathy and scepticism by respondents to a University of Nottingham survey.

Respondents to the UK Business Barometer (UKBB), run by The University of Nottingham Institute for Enterprise and Innovation (UNIEI), have cast doubts over whether pouring public money into the coffers of SMEs is likely to provide them with the lifeline they so desperately need.

Many are worried that the cash would not reach the small and micro businesses which are suffering the most from cash flow problems.

Next month the Chancellor of the Exchequer, George Osborne, will announce measures designed to boost the economy and unveil details of his ‘credit easing’ scheme, which will see the Treasury buying bonds issued by small and mid-sized companies allowing government cash to be channelled directly into small businesses.

The survey, which monitors the views of businesses and their advisers, used its real time software yesterday to ask them to what extent they feel reassured that the initiative will improve access to finance for small businesses.

Their response shows that they will need some convincing if the Chancellor is to persuade them that his plan will indeed bring the access to finance that the small business community needs.

Just under three-quarters (73 per cent) of businesses said that they are not at all reassured or unsure, while 20 per cent are still reserving judgment.

Commenting on the planned scheme, one small business person said: “Osborne’s proposal illustrates the disconnect between government and the business community. A large proportion of businesses, and therefore employees, are in the ‘small’ and ‘micro’ categories. They won’t issue bonds, so the Treasury’s money will never reach them.”

Another added: “The Credit Easing scheme could be a ‘godsend’ for companies like ours. The reason I have scored it so low however is that none of the government initiatives in this area seem to filter down to the companies that need it and I have no confidence that this will either. But I live in hope!”

Advisers were very much in agreement with their clients with 68 per cent saying that they are not at all reassured or unsure and 21 per cent were neither reassured or sure.

The advisers quizzed had a lot to say on the matter. Comments left in addition to the survey included:

“For micro businesses the cost of issuing the bonds would be prohibitive and bureaucratic and a non starter. The measure simply illustrates the Civil Service do not understand the small business sector or do understand and are being disingenuous.”

“The ‘credit easing scheme’ is unlikely to be of any benefit to most small businesses as it is likely that the compliance and submission process and cost will be vastly disproportionate to the funds being sought and the capabilities of most small businessmen.”

“ Gov buying Bonds! — Previous experience of government schemes indicate that only ‘safe’ investments will be made, i.e. those that are already able to access bank finance. While those that have difficulty raising bank finance will not be considered for bond purchase. Hence no improvement in access to finance.”

“The new Treasury bond idea is good if it can reach the really small businesses; say under £5m t/o or less than 25 staff. They are the ones that the banks are failing most. Banks now admit they are not lending enough to the small end of SMEs.”

The UK Business Barometer (UKBB) and the UK Business Adviser Barometer (UKBAB) provide a snapshot of how small and medium-sized businesses are coping with the current state of the economy and aim to uncover the key issues affecting the small business market. Operating over the web means that results can be rapidly generated and the surveys have unique software that enables results to be processed and posted on their respective websites immediately they arrive.