Manufacturers call for bank review as disengagement continues

As well as an immediate review of current options including switching and increasing competition, the manufacturers' organisation EEF is also urging the setting up of a new Challenger Bank using the £1billion currently earmarked for a British Investment Bank. The SME Finance Monitor found that disengagement with external finance providers continues to rise; finance is increasingly identified as an obstacle to growth with the UK needing a more competitive and dynamic SME finance environment. EEF Chief Economist Lee Hopley said that despite investment and investment intentions holding up, disengagement with external finance providers was on the rise with just 40% of SMEs in the last quarter saying they now use external finance. She added: "The SME Finance Monitor shows rising disengagement with external finance providers and we need to turn this around with a more dynamic financial sector supporting the real economy. Because banks are such a key source of finance for SMEs, the government must launch a focused-review on options for increasing private competition in SME banking. The government should also form its 'business bank' as a commercially focused retail challenger to compete with the incumbents." Echoing the EEF view, the Forum of Private Business' head of policy, Alex Jackman, said bank lending was not at the level required to encourage growth. "Gone, it seems, are the days of the bank manager who likes to say 'yes', and relationship banking has to resume if this perception is to change," he concluded..