Following recent insolvency figures announcing a rise in company insolvencies, Business Debtline, the free, independent advice service for small and micro businesses, is warning that there are many thousands more small businesses across the UK struggling with their debts.

Last year Business Debtline spoke to a record number of small business owners and directors. In all, Business Debtline advisers answered nearly 38,000 calls – a highest number in the service’s history – from 26,000 small businesses, of which 6,181 had debts of over £50,000.

Nicola Connop spokesperson for Business Debtline said: “Our team of advisers speak to thousands of struggling small businesses every month. Many of these businesses have been hit by the tough economic climate, with lots of callers pointing to trade shortfalls, late payers and supplier issues as the reason for their difficulties. It is clear to us that the difficulties faced by small businesses extend far beyond the insolvency figures announced today.

“Whilst insolvency can seem like a daunting process, there are occasions where it will be the best option, both financially as an individual, and also with a view to trading again in the future. Business Debtline can help small businesses identify when insolvency might be a sensible move. Where it isn’t the right option, we can help small businesses get back on their feet.”

Business Debtline is open 9am – 5:30pm Monday to Friday. Call 0800 197 6062 for free, independent and confidential advice.

Total bank lending to firms outside of finance and real estate must more than double in order to meet the investment needs of the UK economy over the next decade, says a new TUC report.

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.”

 

HSBC has announced a number of commitments aimed at supporting UK businesses in 2012.

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.”

Hilton-Baird Financial Solutions’ latest biannual SME Trends Index, which questioned 417 business owners and finance directors last October, has shown most respondents enter January 2012 more apprehensive about the future than they were in April 2011.

With late payment rife, order books down and the challenges involved in accessing traditional funding well-documented, only 31 per cent of respondents are expecting their business to expand over the next six months. Meanwhile, a worrying 20 per cent predict it will contract. Yet there was an underlying theme amongst respondents that the national media is largely to blame for the length and depth of the downturn due to its constant negativity.

Further analysis of the data confirmed that confidence is crucial, as one respondent summarised: “It would be helpful if all types of the media stopped spreading negative news. It is so depressing when it is all doom and gloom. If people feel there is hope, everyone can face the future with a more positive outlook. Now there is never any good news – everything is talked down.”

Such negativity can become a self-fulfilling prophecy that has a detrimental impact on businesses and their future investments and outlook. Given that the independent Office for Budget Responsibility has downgraded its economic growth forecast for 2012 to just 0.7 per cent, the chances of grim vision becoming a reality look increasingly likely.

This mindset has therefore resulted in business owners opting to hoard their cash rather than invest in their future, as one respondent reveals: “We should be recruiting more staff, but the economic outlook is so uncertain that we are holding back on all major decisions. If confidence is boosted, I expect strong growth for our company, if not we could be in for a very rough ride and all bets are off.”

The blame does not lie solely with the media however, with others instead highlighting limited access to funding – which is required to overcome businesses’ cash flow challenges – as a reason for the sustained downturn: “There is not enough money circulating,” explained another respondent. “Businesses are relying on bigger and bigger overdrafts where previously none were required. Small businesses cannot carry the financial burden of non-payment of bills while the banks are not prepared to facilitate credit to the level it is required.”

Managing director of Hilton-Baird Financial Solutions, Evette Orams, has urged businesses to take a thorough look at the wider options available to them: “It is clear that UK businesses – and SMEs in particular – are suffering from a distinct lack of confidence currently. This inevitably leads them to at least think twice, if not defer any decisions regarding investment in their business’ growth.”

She continued: “The difficulties firms have faced in accessing traditional sources of bank finance has served to exacerbate issues, but, by exploring other options available, owners can give themselves the best chances of growth and take measures towards safeguarding their long-term stability. Our survey found that 50 per cent of invoice finance users expected their business to expand in the next six months, demonstrating that by securing a more flexible and targeted cash flow solution businesses can set themselves up for growth.”

Business Secretary Vince Cable has set out the next steps to diversify business finance, announcing details of an industry-led Taskforce to be led by Tim Breedon, Legal and General chief executive and current chairman of the Association of British Insurers.

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.