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.”

 

The announcement from the sandwich chain Subway that it will open 600 new branches and create 6,000 jobs came in a sea of big redundancy announcements, but it is no surprise to the Franchise industry who are finding business is thriving, even in these turbulent times.

The announcement comes straight on the back of the news that McDonald’s and Starbucks are expanding, creating 2,500 and 5,000 new jobs respectively. Consequently, more people than ever before are seriously considering franchising as an option for starting their own business.

The government are once again calling on those with the entrepreneurial spirit to go forth and rebuild our economy. Prime Minister David Cameron said at the launch of ‘Business in You‘(a major new campaign aimed at inspiring people to start or grow their own businesses):

“Small businesses and entrepreneurs are the lifeblood of the British economy and I am determined that we, working with the private sector, do everything we can to help them to start up and to grow in 2012. I want to encourage people to go for it and make this the year of enterprise – whether that is fulfilling their dream of starting a new business or taking the leap to grow their business, to employ more staff, or to start exporting.”

Finding the right business to launch in such difficult times can be risky and the harsh reality is that one in three new businesses fail within the first three years. In stark contrast 98% franchise businesses are still going after 3 years and the percentage of franchise units profitable (including new businesses) is 90% according to the British Franchise Association (BFA) survey from Natwest.

The Franchise Show is a free resource for anyone thinking of buying a franchise, taking place at ExCel London over 24th – 25th February 2012, the show will host 120 brands from fast food to locksmiths to accountancy firms.  There will be over 100 free seminars from the industry experts, and the opportunity to find out about franchise financing options.

To find out more about franchising visit www.TheFranchiseShow.com

Follow the latest news, views and updates about the show on Twitter @FranchiseShowUK

Retail sales fell in the year to January, after modest growth last month, and sales were considered poor for the time of the year, the CBI said.

According to the latest monthly CBI Distributive Trades Survey covering the first two weeks in January, 44 per cent of retailers saw sales volumes fall on a year ago, while 22 per cent reported a rise, giving a balance of -22 per cent. This was the lowest since March 2009 (-44 per cent), but was broadly in line with expectations (-18 per cent).

Retailers reported sales were disappointing for the time of year (-20 per cent) and orders were also down (-14 per cent), with firms expecting levels to fall again next month (-23 per cent). Stock levels remained constant, but fairly low, in line with recent months (+10). Retailers expect annual sales volumes to continue to fall in February, albeit it at a slower pace than this month (-10 per cent).

There was a mixed picture across the sub-sectors, but with most reporting a fall in sales volumes on a year ago, including hardware & DIY (-80 per cent), durable household goods (-100 per cent) and non-specialised retailers such as department stores (-34 per cent). Grocers saw a modest increase in sales (+6 per cent), following a much stronger trading period in December (+52 per cent). The non-store category, which includes online and mail-order, performed well (+50 per cent).

Ian McCafferty, CBI chief economic adviser, said:

“Shoppers have reined-in spending across the board at the start of the New Year after taking advantage of early discounting last month, which boosted pre-Christmas sales.

“Family budgets are under continuing pressure with inflation still high and wage increases modest.

“Consumers are still holding off particularly from buying big ticket items like washing machines and fridges. Online and mail order sales were the only areas that performed well in January, but growth was still down on last month.”

Among wholesalers, 59 per cent saw sales volumes rise, while 22 per cent reported a fall, giving a rounded balance of +36 per cent, exceeding expectations of -2 per cent. Sales are expected to increase again next month (+24 per cent).

Motor traders saw sales volumes fall for the 13th consecutive month (-9 per cent), and a similar decline is expected next month (-12 per cent).

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.”

New figures show that six in 10 small firms believe the London 2012 Games will not have a positive impact on their business in the long term despite David Cameron saying today that the UK is “on track” for a lasting legacy, the Federation of Small Businesses (FSB) said today.

As the UK marks 200 days until the start of the Olympic and Paralympic Games, the FSB’s ‘Voice of Small Business’ Survey Panel shows that 62 per cent of small firms believe that the Games will have no long term positive impact on their business, despite promises that the legacy of the London 2012 Games will continue for years.

Only seven per cent of small businesses believe the Games will benefit their business overall, and a quarter (25 per cent) expect a negative impact on their business.

The FSB is concerned that when the bid for the London 2012 Games went through, it was sold on the basis that is would create a long legacy for the country, yet small businesses do not believe that they will benefit from this.

With 200 days to go, the FSB is calling on the Government and Olympics Authorities to ensure that small firms are aware of how they can reap the benefits of the Games and the tourism benefits that can come from them.

John Walker, national chairman, Federation of Small Businesses, said: “It is worrying that 200 days before the Olympic and Paralympic Games are set to begin, small businesses think it will not benefit their business. This is even more worrying considering the London 2012 Games was sold on the basis of its legacy. We all know times are tough, but 2012 is a year of big events that small firms should be able to benefit from. The Government and Olympic Authorities must help show small businesses how they can reap the rewards from one of the biggest sporting and tourism events the country has seen for years.”