The TUC report Banking after Vickers says that government has identified £450 billion-worth of physical investment, vital to the UK over the next decade. But with the current stock of bank loans to non-financial firms (excluding real estate) at just £322 billion, banks would need to more than double their current level of lending to meet UK investment needs. This simply won’t happen without radical reform of the banking sector, says the TUC.

Banking after Vickers says that since 2008 the main focus of debate on banking has been preventing a repeat of the crash and subsequent taxpayer bailout, addressed by the Vickers Commission, and the remuneration of top bankers.

But with the UK’s growth prospects dependent on greater investment and access to credit, particularly for SMEs, the report argues that reforming the banking sector so that it better supports the real economy is the most vital banking issue facing the UK.

The report sets out four challenges facing the UK banking sector: low investment, SMEs, sectoral and geographical rebalancing of the economy and green growth.

Banking after Vickers shows that the UK’s level of investment has been either the lowest or second lowest in the G7 for 30 years, and that the banking sector has a poor track record of lending outside of real estate and finance.

While credit easing and the Green Investment Bank are positive first steps towards encouraging more lending, they fall well short of the level of investment the UK economy needs, says the TUC.

TUC General Secretary Brendan Barber said: “Much of the media and political debate around banking has been on top bonuses and preventing another financial crash.

“But while these are both important issues, people are more concerned about jobs, better wages and healthier businesses – and banks have a vital role to play in creating all this.

“Decades of under investment, compounded by banks’ poor track record of lending outside of real estate and finance, have left the UK economy dangerously lopsided. Our economy is far too focused on finance and banking, and in the South East.

“Greater lending to SMEs and support for green investment is vital to our future economic prospects but our current banking system is woefully ill-equipped to lend.

“Bold new ideas are needed to reform the banking sector so that it returns to its proper place as the engine of wider economy growth, and not as the cause of an economic depression.”

The bank will continue to provide support for businesses which trade or aspire to trade internationally and commits to providing lending facilities to support business growth and job creation.

The bank has confirmed that it met its Merlin lending intentions in 2011, which were agreed with the UK Government, exceeding the full year target to provide £38.8 billion of lending facilities to UK business customers and supplying gross new lending facilities of more than £11.7bn to Small and Medium-sized Enterprises (SMEs).

Having met its Merlin intentions in 2011, HSBC plans to lend even more to SMEs in 2012, providing there is suitable demand. In addition, to reinforce the bank’s strategy to be the leading international trade and business bank, HSBC will further support UK businesses by committing to:

• Recruit around 50 additional International Commercial Managers, ensuring customers involved in overseas trade are fully supported. This will bring the total number of International Commercial Managers to 180;
• Support export trade to the tune of £7 billion through our Trade Finance capabilities;
• Look to manage £30 billion of invoices for customers trading within the UK or internationally, providing critical working capital for these customers;
• Look to approve at least 80 per cent of applications for finance from SMEs; and
• Extend the availability of HSBC’s International Business Overdraft, which offers reduced interest rate for each overseas country a small business is trading with, up to a maximum discount of three per cent for the first 12 months.

Jacques-Emmanuel Blanchet, head of commercial banking UK at HSBC, said: “HSBC is committed to supporting UK business. In 2011, the Merlin intentions gave focus to SME lending, and we continued to enhance our support, launching new innovative products and holding hundreds of events across the UK and the world, to encourage UK businesses to share their knowledge and develop long term relationships internationally.

“In 2012 we will further increase our support for SMEs looking to grow and internationalise, across all sectors and all regions. Many of our customers are experiencing growth by trading in new markets and we are very well placed to support this, through our growing team of specialist International commercial managers and HSBC’s enviable global network, to give UK businesses the best chance of success.”

Darren Westlake, Crowdcube

The investment was raised in only 10 days and finishes an impressive first year for the start-up that is bucking the economic gloom and proving that crowdfunding is a viable alternative source of business finance for companies.

Crowdcube is the first crowdfunding website in the world that enables members of public to invest and receive shares in UK-based companies that register on the site to raise finance. Instead of competing for limited business angel or venture capital funding, or hard to get and expensive bank finance, small businesses use Crowdcube as a platform to connect with a nation of ‘Armchair Dragons’ – ordinary people who provide investment in exchange for equity.

The success of crowdfunding has caught the eye of the government with business secretary Vince Cable last week announcing steps to create a new taskforce to boost the future of business finance for SMEs, including a focus on crowdfunding. In his speech Cable described “..exciting innovations that provide alternatives to bank lending…Businesses are selling bonds directly to their customers, and peer-to-peer lending has opened up opportunities for savers to invest directly in the fortunes of UK businesses. I want to investigate and dismantle any barriers to these and future innovations.”

Darren Westlake, co-founder and CEO of Crowdcube said: “Business finance is at a critical turning point as last week’s announcement by Vince Cable highlights. The future success of Britain’s economy is dependent on empowering small business Britain to succeed and grow, but access to traditional methods of funding are often a barrier. The emergence of alternative sources of business finance, like crowdfunding, is already proving to be a very effective and popular solution for both entrepreneurs and investors.”

He continued, “We are delighted to have used our own website to raise the money we need to accelerate our growth. Since launching in February 2011 we have raised £1.7 million in finance for nine small businesses needing investment to grow and now has 37 businesses registered on the site. This investment will mean that we can hire support staff and continue to develop Crowdcube into a world-class funding platform that supports entrepreneurs with the finance they need to succeed in the future.”

Another small business, Edge Forecast Software, funded on the same day as Crowdcube and raised £15,000 in return for 20 per cent equity in its financial forecasting solution. It becomes the ninth successful deal on the site.

Businesses should be aware that the last possible submission date for Bacs Direct Credit payments to reach suppliers before Christmas is the 21st December. There is only a small window of opportunity in between Christmas and New Year and payments due on the first working day of 2012 must be submitted to Bacs by the 29th December if they’re to hit accounts on time.

Mike Hutchinson, head of marketing at Bacs, said: “Most of us are aware of the last posting date before Christmas for cards and presents to arrive on time, but equally businesses should be aware of the last day they can submit payments to be processed.
Research from Bacs last month concluded that small and medium-sized businesses in the UK are owed £33.6 billion in overdue payments – and one of the most common excuses for paying late, given by 37 per cent of companies, was that ‘the cheque’s in the post’, a problem that will be exacerbated over the next three weeks.

“Businesses can’t rely on the post to deliver cheque payments at this time of year. Managers would do well to ensure they have automated as many payments as possible, and have submitted all payments promptly, in line with the due date. Then they can relax and enjoy the break, safe in the knowledge that they won’t come back to work in January to face outstanding debts.”

A full list of Christmas and New Year processing dates for this year is available at: www.bacs.co.uk

Tim Breedon will be supported by a panel of experts drawn from the business and finance community, who will examine the challenges facing businesses in diversifying their finance. The focus will be on debt and credit products, looking at a range of finance choices, old and new, from corporate bonds to ‘crowd-funding’.

Business Secretary Vince Cable said:

“Businesses across the UK are still in many cases unhappy with the way they have been treated by banks.

“We have secured a rise in new lending from the biggest banks this year and credit easing is designed to provide another immediate boost. But I want to see as much competition in the market as possible and for businesses to have access to a wide range of finance sources.

“There are exciting innovations emerging that provide alternatives to bank lending. Businesses are selling bonds directly to their customers, missing out the middle-men. And peer-to-peer lending has opened up opportunities for savers to invest directly in the fortunes of UK businesses. I want to investigate and dismantle any barriers to these and future innovations.

“Tim Breedon is a highly capable and well-respected figure in finance and I look forward to working with him in the coming months as he takes forward this important work.”

The Taskforce was announced as part of the credit easing package in the Autumn Statement. It will report to Government ahead of the 2012 Budget statement.

UK businesses have been heavily reliant on banks to raise finance. The majority of smaller and mid-sized businesses rely solely on bank loans to raise finance. Only around 10 per cent of these businesses seek asset-based finance and fewer than 5 per cent choose bond or mezzanine finance.

The Taskforce will work with businesses, lenders, investors and providers of alternative finance to examine structural and behavioural barriers to raising non-bank finance. It will set out what steps are needed to ensure businesses can access a wider range of alternative finance sources.

With bank confidence still at an all-time low, small business owners have turned to their personal funds to boost their businesses. Over half (57 per cent) of small business owners have used their personal funds to inject capital into their business and 17 per cent have asked friends and family for additional funds. With over 70 per cent of borro’s customers being small business owners it is not surprising that 16 per cent of SME owners have also used their personal assets to secure finance over the past 12 months.

Two thirds (66 per cent) of small and medium sized business owners  lack confidence in their bank, and are unsure of whether their bank will lend to them. As a result only one in five (19 per cent) of SMEs have attempted to secure bank finance for their business in the past year and only a third (31 per cent) of this group have been successful in securing the finance in full.

Over two thirds (67 per cent) of small to medium sized business owners believe that banks should relax their lending criteria as those seeking finance are denied due to credit checks and not fitting the lenders profile.

Paul Aitken, CEO of borro, commented: “A dramatic shift is needed for smaller business owners to feel they can gain access to much needed finance. While some of the initiatives introduced by the Government may ease the capital battle that has taken place over the past year; there is still a demand for small business owners to access finance quickly. This may be to ensure the business is able to take advantage of growth opportunities or address cash flow problems before they escalate. Our research demonstrates that this demand is not being met by banks and other traditional lenders.”

1. Contactless Christmas – More customers now have the capability on their credit or debit cards to pay via contactless terminals. Once the card has been tapped against the contactless reader, it normally takes less than one second to complete the payment. The whole transaction is significantly faster than cash or chip and PIN, reducing queues at the tills during this busy period.
2. Speedy spending – A broadband connection not only speeds up payment processing with a broadband connected card payment terminal but it frees up your phone line if customers want to call you whilst payments are being processed. Critical at this time of year when good customer service goes a long way.
3. S’no’w guarantees – Heavy snow fall last year created chaos for Christmas deliveries. If you deliver products or services, keep your customers informed about timings and if snow does fall, contact your customers to update them on revised delivery schedules.
4. Stock’ing’ fillers – Think ahead and plan your stock levels – what’s likely to sell quick and what products are less in demand that you can save you space on? Unexpected snow not only impacts deliveries to your customers but also stock so check delivery schedules with your suppliers.
5. Keep it merry – Christmas can be a stressful time of year but a reliable and cheerful service is always well received by customers and can alleviate some of the pressures that Christmas brings to you and your customers.

Intuit tested entrepreneurs thinking about starting or already running a business and found many are:

• Without a plan. The golden rule of business is have a plan and yet 16 per cent of aspiring entrepreneurs and 20 per cent of existing business owners do not have a plan or expect to have one by the time they start their business. A plan helps a business stay focused; it is also necessary when applying for external funding.
• Baffled by accounting speak. Entrepreneurs aren’t always financial experts and many find even basic accounting terms confusing. Almost half (47 per cent) do not know the correct definition of gross profit and 31 per cent do not know what turnover means. 19 per cent of respondents do not know what margin means and 16 per cent do not know the correct definition of cash flow.
• Confused by compliance. Only 61 per cent are aware that the VAT threshold is £73,000 and more than one in five (23 per cent) do not know the correct definition of VAT taxable turnover. Tracking, recording and reporting VAT is one of the biggest headaches for small businesses and getting it wrong can have a negative impact on cash flow and leave a business vulnerable to a penalty from the HMRC.

“We want to help Britain’s small businesses get fighting fit,” said Pernille Bruun-Jensen, managing director at Intuit UK. “Too many businesses run out of cash, manage it badly or just don’t have the time or the skills to help themselves out of financial difficulty. In addition to accounting software which can help business owners better manage their finances, entrepreneurs need practical advice and support to feel more confident and equipped to tackle the financial challenges of starting and running a business. Over the next year Intuit will be training more than 1,000 small businesses across the UK as part of a workshop initiative backed by the Department for Business, Innovation and Skills.”

HSBC is participating in the Regional Growth Fund, a £1.4 billion fund operating across England from 2011 to 2013. The fund supports projects and programmes that lever private sector investment creating economic growth and sustainable employment. It aims particularly to help those areas and communities currently dependent on the public sector to make the transition to sustainable private sector-led growth and prosperity.

The bank is creating an ‘Assisted Asset Purchase Scheme’ that will enable qualifying businesses, to receive additional funds of up to £500,000 to put towards the acquisition of assets, which would not be funded under normal commercial terms.

In order to qualify for RGF funds a borrower must be able to demonstrate that they will create additional employment, have a turnover of up to £25 million and that the asset purchase would not go ahead without RGF support. The Assisted Asset Purchase Scheme will provide a grant of up to £25,000 for each additional full time positions created by the acquisition of a new asset.

Jacques-Emmanuel Blanchet, head of commercial banking, HSBC UK said:

“I am delighted that the bank is participating in the Government’s Regional Growth Fund.

“HSBC is committed to supporting strong viable businesses and our Assisted Asset Purchase Scheme highlights this. The scheme will provide critical support for businesses that are looking to grow and recruit, enabling them to purchase the assets they need, to achieve their goals.”

Business Minister Mark Prisk said: “HSBC’s Assisted Asset Purchase Scheme will help SMEs that want to invest and create jobs – but that cannot currently access commercial funding. They will deliver a shot in the arm to local communities and help small businesses drive local growth.

“100 per cent of the RGF funding will be provided as grants to small businesses with the bank employing their regional network to administer the scheme for free.”

The cost of administering the bank’s allocated funds will be covered by HSBC. The £25 million of government investment is coming from round one of the Regional Growth Fund. Any interest earned on this investment will be used for further grants or returned to the government.

Of the 412 respondents to the CBI’s latest quarterly SME Trends Survey, 27 per cent said that domestic orders rose in the three months to October and 27 per cent said that they fell – the resulting balance of zero per cent was the lowest since January 2010 (-10 per cent). Over the same period export orders fell (-8 per cent) for the first time since October 2009 (-13 per cent) and disappointed expectations of a modest increase (+8 per cent).

In the next three months, firms expect a slight fall in domestic orders (-4 per cent) and no growth in export orders (+1 per cent).

Firms expect to reduce their stock holdings in the coming quarter, with finished goods inventories in particular set to fall (-8 per cent). This follows continued stock-building over the past three months (+10).

In line with expectations of stagnant orders and falling stocks, manufacturers expect output to fall slightly over the coming quarter (-4 per cent), following modest growth in the three months to October (+6 per cent).

Sentiment about the general business situation fell for the second consecutive quarter. A balance of -26 per cent of firms reported that they were less optimistic than three months ago, the sharpest fall in sentiment since April 2009 (-42 per cent). Sentiment about export prospects also deteriorated (-19), marking the first fall since April 2009.

Lucy Armstrong, Chair of the CBI’s SME Council, said:

“Small and medium-sized manufacturers have seen domestic demand flat-lining in the past three months, and will have been particularly disappointed by an unexpected fall in export orders.

“Firms believe demand will remain flat in the coming quarter and they anticipate a small fall in production. As a result, sentiment has taken a real hit, falling at rates not seen since the height of the recession in April 2009.”

Firms increased their headcount (+16 per cent) for the fifth successive quarter. However, in line with expectations of weaker activity in the coming quarter, manufacturers expect only a slight increase in numbers employed (+4 per cent).

Investment intentions for the year ahead have not improved on the previous survey, with firms still planning to spend less on buildings (-20 per cent) and plant and machinery (-9) relative to the previous twelve months. In particular, investment intentions for plant and machinery have remained negative for the second consecutive quarter.

Output price inflation moderated further this quarter. Domestic and export price inflation slowed (+10 per cent and +6 per cent respectively), but was still outpaced by a strong rise in average unit costs (+30 per cent).

In the next three months, firms expect the rise in costs to moderate (+20 per cent), but to still outstrip output price inflation. Domestic price inflation is set to ease further (+6 per cent), while export prices are anticipated to continue rising only marginally (+7 per cent).