A survey released today by the British Chambers of Commerce reveals falling levels of trust in financial institutions among businesses. The results, comprising responses from 1,560 businesses including Norfolk show that although banks and building societies are the main source of finance for firms, half of businesses lack trust in these financial institutions. Over a third of respondents said that they trust financial institutions less than they did a year ago, and almost four in ten are not confident in securing finance.
The survey shows the following:
- Almost half (49%) of firms use banks or building societies for external finance, with only 10% using equity, and 8% using grants, venture capital, private equity, peer-to-peer lending and angel finance combined.
- 50% of firms mistrust banks and building societies; 38% of businesses trust them less than a year ago.
- Only 57% of respondents feel confident that they could secure external finance, but over a third (37%) are not confident. However 59% of firms say a government-backed business bank would make them more confident about accessing finance.
- When asked about government-backed finance schemes, 43% of businesses had not heard of any of them, with younger businesses and micro firms more likely to be unaware of them.
Commenting on the findings, Caroline Williams CEO Norfolk Chamber said:
“As we approach the end of the party conference season, Britain’s politicians must stop scoring points against each other and start scoring points for economic management, starting with the thorny problem of business access to finance.
“Our new research clearly identifies the scale of the problem: half the companies we surveyed mistrust banks, and levels of trust have worsened significantly over the last year. Four in ten companies are not confident that they could get external finance. And awareness and take-up of existing government support schemes, which are run through the banks, is extremely low, with the recent LIBOR and mis-selling scandals damaging confidence among businesses. While it is important to avoid stifling growth in financial services with over-regulation, the City’s primary role should be to oil the wheels of the economy, providing the patient capital businesses need to plan for the future and grow.
“Financial institutions need to rebuild trust and repair damaged relationships with businesses and improve transparency. Regulators should look to increase competition in the banking sector to ensure businesses have more choice, and the government must ensure that plans to create a British Business Bank mean more funds available to growing businesses. Six in ten companies would feel more confident in seeking finance if Britain had its own dedicated business bank.
“While it is right that the businesses consider other forms of funding, the results of this survey show that bank finance is, and will remain, the dominant source for businesses. Other BCC surveys conducted this year have shown companies’ concerns about access to working capital, and the impact of this, for example, on small businesses looking to export for the first time.
“Political leaders always seek to woo the favour of corporate Britain. But the next election will be won or lost on what happens in the real economy. Our findings suggest that the parties need to focus on access to finance for Britain’s army of small- and medium-sized companies, and particularly new and growing companies, if they are to win the votes of Britain’s wealth creators, and the people who work in business, in years to come.”
