Former Business Minister Blasts Bank Referrals

The government's matchmaking scheme for SME funding comes in for strong criticism from the minister who originally set it up under David Cameron's coalition government.

The Treasury gave itself a little pat on the back yesterday, releasing a report which showed that 230 small businesses "from beauticians to forklift truck training companies" had benefited from a bank referral scheme in the past nine months. The government scheme requires 9 of the UK’s biggest banks to pass on the details of small businesses they have turned down for loans to three finance platforms. 

Liberal Democrat leader Vince Cable, who was the Secretary of State when the scheme was originally planned and implemented, told City A.M. of his disappointment and anger, both at the slowness of progress and the conduct of the big banks, who, he says are keeping alternative financial institutions out.

“This is disappointing in scale and speed," said Dr. Cable. “The referral scheme was agreed when I was secretary of state and is only now happening - and on a minute scale.

“The original idea was to open up the offer to all challenger banks but the established big players seem to have succeeded in restricting competition to niche credit providers.”

Dr. Cable doesn't believe in lending for lending's sake.  He has cautioned against excessive borrowing and earlier this week his party urged politicians and voters to take more heed of the Bank Of England with regard to Brexit and the risks of financial instability. 

Keith Morgan, the CEO of the British Business Bank, said something which could be interpreted as praise for the scheme, or criticism of it:

As highlighted by our recent 2017 Small Business Finance Markets report, the most common response from smaller businesses when they do not get the full amount of finance applied for is to give up or cancel their plans. This can mean businesses missing potential expansion opportunities, with a knock-on effect on UK economic growth. It is therefore heartening to see the positive start made by the bank referral scheme.