Bank Charges Crippling Small and Medium Sized Enterprises

Posted on 31 July, 2012 by MOVEHUT

A recent survey carried out by recruitment specialist IntaPeople has revealed that commercial property businesses are being subjected to bank charge rises that could seriously impede their future growth prospects.

IntaPeople surveyed 300 senior finance professionals earlier this month to measure the level of support they are receiving from their bank.

A worrying 41 per cent of respondents revealed that their commercial property business had seen bank charges rise in the past six months. These statistics, when broken down further showed that 13 per cent of respondents said their changes had increased ‘significantly’, while 28 per cent said they had risen ‘slightly’.

In addition to this, 35 per cent of commercial property businesses have seen their access to finance drop over the same period of time.

Director for IntaPeople, Stephen Riley, commented: “We are extremely disappointed to learn that firms are facing another barrier to growth in the form of increased bank charges.

“In the current economic climate, businesses need all the help they can get. Although some of these increases may seem inconsequential to banks, for small and medium-sized businesses it could ultimately determine whether or not they take on additional staff. With the reputation of banks already at an all-time low, the timing is staggering.”

Only 20 per cent of those SMEs surveyed said they were either ‘happy’ or ‘very happy’ with the service administered by their bank.

In response to this, IntaPeople has called on the Government to do more to encourage competition between the big five banks, so that commercial property businesses are less likely to be held to ransom by their existing suppliers.

Mr Riley commented: “Very few organisations would risk losing loyal customers by increasing their charges at such a time.

“It shows the banks are fully aware of the limited alternatives currently available to businesses in the UK — something the Government needs to rectify quickly if companies are to thrive in the future.”

It’s not just the UK banks that aren’t lending to small to medium sized commercial property enterprises.  The latest report by Ireland’s Central Statistics Office – the equivalent of the ONS – into credit arrangements in the economy for small and medium commercial property enterprises, revealed, unsurprisingly, that credit is very hard for small firms to access.

Overall, for those commercial property firms that do apply for finance, only 66 per cent of them are getting it. This is down from 99 per cent in the heady days of 2007.

Ireland’s banks have been told to decrease their financial leverage; to chase more deposits while running down the value of their loan book and increasing interest rates and charges.

This means businesses will have to restrict inventories on hand, strip costs down, and increase mark ups to help service increasing interest payments. More or less the exact opposite of what you’d need to get commercial property businesses going again, boosting employment and GDP.




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