Commons Sense

House of Commons · Ministerial Statement

SME Finance

09 May 2024 · 4 other contributors

Opened by Harriett Baldwin Con West Worcestershire

Business & Trade

Summarised by AI from the official record, so it can contain mistakes.

Read the full transcript on Parliament.uk

At a glance

Harriett Baldwin raised concerns about sme finance in the House of Commons. A government minister responded. Other MPs also contributed.

Key points

  • Harriett Baldwin presented the Treasury Committee's report on access to finance for SMEs
  • The report highlights issues with the Business Banking Resolution Service and potential impacts of Basel 3.1 regulations
  • The report calls for a new mechanism to replace the Business Banking Resolution Service by year-end

How the debate unfolded

MPs spoke in turn to share their views and ask questions. Here's what each person said.

Government Statement

Harriett Baldwin

Harriett Baldwin presented the Treasury Committee's report on access to finance for SMEs, highlighting issues such as the failure of the Business Banking Resolution Service and the potential negative impacts of Basel 3.1 regulations proposed by the PRA. The report calls for a new mechanism to replace the Business Banking Resolution Service by the end of the year, urges the Government to assess the effectiveness of the British Business Bank annually, and highlights concerns about bank account closures and lending restrictions. The minister noted the importance of small businesses in the UK economy and expressed concern over regulatory measures that might hinder their growth.

Other contributors (4)
  • Therese Coffey

    Question

    Commended Harriett Baldwin for her work, highlighted difficulties in opening bank accounts and the potential negative impact of PRA’s approach on SME growth. Emphasised that ensuring the prosperity of small businesses is crucial for national economic success.

    Minister reply

    Agreed with Therese Coffey's concerns about inflation impacting SMEs, noting a decline in credit acceptance rates from 80% to 50%. Suggested that tightening access to finance through regulatory changes does not seem appropriate at the moment, especially given the US and EU's non-compliance with Basel 3.1.

  • Keir Mather Lab Selby

    Question

    Acknowledged Harriett Baldwin’s work on the report and raised concerns about SMEs' confidence in accessing finance, citing a £95 billion financing gap and the cautionary approach of large high street banks towards lending to SMEs. Asked for an assessment of future appetite levels and tools available to address market hesitancy.

    Minister reply

    Acknowledged Keir Mather's concerns about financial apathy among SMEs, noting that only 5% of rejected businesses consider seeking alternative providers. Highlighted the British Business Bank’s role in guiding SME growth but noted its under-recognition as a potential hindrance.

  • Peter Grant

    Question

    I am grateful to the Chair of the Treasury Committee for making this statement today. She will be aware that one of the main reasons why a lot of small businesses have to rely on bank funding is because bigger businesses do not pay their bills on time, and all too often do not pay their bills at all. A lot of small businesses in my constituency, particularly in construction-related work, tell me that they sometimes have to wait six months or more to get paid. That increases the risk factor for a bank, because it is much more likely that the small business will fail. Has the Committee looked at the problem, or does it intend to do so, where small businesses, particularly in the construction sector, are not paid for their work?

    Minister reply

    The hon. Gentleman makes an excellent point that everyone in this House will recognise as a challenge. Getting paid by bigger businesses is a bane of the lives of many small business owners. I know there has been a lot of work in the Department for Business and Trade, and the Government need to lead by example by promptly paying for services. The Committee heard evidence that small businesses continue to be frustrated by this.

Shadow Comment

Therese Coffey

Therese Coffey commended Harriett Baldwin for her work on the Treasury Committee, emphasising the difficulty SMEs face in opening bank accounts and the potential negative impact of PRA's approach on small business growth. She stressed the importance of ensuring that the entire country prospers through the success of small businesses.

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