• PDF: Immediate delivery

Small Businesses & Banks
UK Market Assessment 2010

  • Publication Date:April 2010
  • Publisher:Key Note
  • Product Type: Report
  • Pages:198

Small Businesses & Banks UK Market Assessment 2010

Small businesses do not love their banks, as they are large and impersonal, and withdraw their financial support in hard times. In 2010, a difficult period has led to an apparent shortfall in bank finance to small businesses, because (the banks say) small businesses do not want their loans. The financial crisis led Irish and other foreign banks to cut their lending in the UK, reducing lending capacity to small and medium-sized enterprises (SMEs) by 30%, as estimated by Key Note. Small businesses contend that terms for loans were tightened, and the cost of obtaining a loan increased, arbitrarily and overnight. Supportive financing arrangements promoted by government have failed to encourage small businesses to borrow and banks to lend. Whatever the cause, small businesses have reduced their reliance on banks since the recession began in 2008 by reducing their level of activity.Until 2008, small businesses had no difficulty in raising investment funds, whether from banks, venture capital, private-equity funds or other sources in the UK or abroad. None of these sources has proved adequate to the demands for liquidity from small business since 2008, and small business will suffer between 2010 and 2014. This will have significant dampening effects on employment, owing to the fact that most employment in the UK is provided by small businesses.

The dynamics of small business did not change during the 2000s. Manufacturing, in particular, continues to suffer badly, as does agriculture. Business services have prospered, however, and the growth in small firms has been particularly marked in that area. The number of small firms was reasonably stable in recent years until the recession, with a fall in medium-sized businesses accounted for by industrial restructuring. Recession could lead to greater failure rates in 2010-2011 as small firms suffer more than larger ones in hard times, and have fewer resources to help them pull through to the recovery.

A long-term trend before the recession indicates that small businesses have gradually been moving from overdraft finance to loans, with an increase in leasing finance as the pace of technological change becomes more demanding. Loans have been taken out for longer periods, and at lower rates of interest. Equity finance was only slightly more popular than in the past, despite heavy government support for private investors, such as venture capitalists and business angels. SMEs often rely on their internal resources and family when they start up.

Government incentives are selective (focused on socially excluded areas) and complex. Advisory services, such as the Small Business Service (SBS), were reformed in the mid-2000s in order to deliver an accessible and effective service to small business through Business Links. There is little sign, in 2010, that any of these services have had a significant effect.

  • Executive Summary
  • 1. Introduction
    • Overview
    • Definition
    • What Is A Small Business?
    • Table 1.1: Bis Definition of Firms by Number of Employees, 2007
  • 2. Strategic Overview
    • Market Dynamics
    • Table 2.1: Number of Businesses per 10,000 Resident Adults
    • by Size of Business and Region, Start 2008
    • Bankruptcies
    • Table 2.2: Bankruptcy Orders by Petition Type
    • and Trading Status, 2005-2008 and Q1-Q2 2009
    • Economic Trends
    • Population
    • Table 2.3: UK Resident Population Estimates by Sex (000), Mid-Years 2005-2009
    • Gross Domestic Product
    • Table 2.4: UK Gross Domestic Product at Current
    • and Annual Chain-Linked Prices (£m), 2005-2009
    • Inflation
    • Table 2.5: UK Rate of Inflation (%), 2005-2009
    • Unemployment
    • Table 2.6: Actual Number of Unemployed Persons in The UK (Million), 2005-2009
    • Household Disposable Income
    • Table 2.7: UK Household Disposable Income per Capita (£), 2004-2008
    • Business Confidence
    • Table 2.8: Summary of Business Confidence Index by Sector, Q3 2008-Q1 2010
    • Contents Small Businesses & Banks
    • Investment
    • Table 2.9: Financial Performance Indicators - Capital Investments:
    • Average % Change in Expectations, 2009-Q1 2010
    • Economic Forecasts
    • Consumer Confidence
    • Table 2.10: Nationwide Consumer Confidence Index, May 2004,
    • March to December 2009 and January to March 2010
  • 3. Characteristics of Smes
    • Background
    • What Are Smes?
    • Turnover of Smes
    • by Industry
    • Table 3.1: UK Smes in Terms of Turnover by Industry and Number
    • of Employees (£m [Excluding Vat] and %), 2008
    • by Region
    • Table 3.2: Turnover of Private-Sector Enterprises by Region (£m),
    • as at 1st January 2007 and 2008
    • Employment
    • by Industry
    • Table 3.3: Employment by Industry in The UK (000 and %), Start 2008
    • by Region
    • Table 3.4: Small Business Employment by Region (000 and %), 2007 and 2008
    • Market Size
    • Number of Businesses
    • by Size of Business
    • Table 3.5: Number, Employment and Turnover of UK Enterprises
    • by Size of Business (Number and £m), Start 2008
    • by Industry
    • Table 3.6: Number of Enterprises in The UK by Industry
    • and Number of Employees (Number and %), Start 2008
    • Industry Analysis
    • Overall Breakdown of UK Private Businesses by Region
    • Table 3.7: Number of Private Businesses in The UK
    • by Region (Number and %), 2005 and 2007
    • Regional Distribution by Industry
    • Table 3.8: Distribution of Enterprises by Region and by Industry (%), Start 2008
    • Concentration of Businesses by Size
    • Table 3.9: Number of Businesses per 10,000 Adults by Region
    • by Number of Employees, Start 2008
    • Small Businesses & Banks Contents
    • Entrepreneurial Activity 2004 to 2008
    • Table 3.10: Total Entrepreneurial Activity by Region
    • (% of Adult Population Involved per 10,000), 2004-2008
    • Start-Ups
    • Start-Ups' Survival
    • by Region
    • Table 3.11: Business Start-Ups Rate per 10,000 of The Adult Population, 2004-2008
    • Insolvencies
    • Table 3.12: Company Liquidations in England
    • and Wales (Number and %), Q3 2008-Q3 2009
  • 4. Government Support
    • Department for Business, Innovation and Skills
    • Enterprise Directorate
    • Business Link
    • Financial Statement and Budget Report
    • UK Government Aid Schemes
    • Government Targets
    • Regulation of Financial Services
    • Enterprise Finance Guarantee Scheme
    • Small Firms Loan Guarantee Scheme
    • Table 4.1: Small Firms Loan Guarantee Scheme -
    • Guarantees Issued (£m and £000), 2004/2005-2007/2008
    • Capital for Enterprise Ltd
    • Capital for Enterprise Fund
    • Enterprise Capital Funds
    • Co-Investment Funds
    • Aspire Fund
    • Social Enterprise Fund
    • Regional Venture Capital Funds
    • Early Growth Funds
    • Bridges Fund
    • Table 4.2: Equity Funds Managed by Capital for Enterprise Ltd
    • (Number and £m), September 2009
    • UK Innovation Investment Fund
    • European Investment Fund
    • Community Development Finance Institutions and Micro-Enterprises
    • Bank of England
    • Government Payment Terms
    • Contents Small Businesses & Banks
  • 5. Trade Finance
    • Number of Exporters by Size
    • Table 5.1: Estimated Number of Exporters in The UK by Turnover by Sector (£), 2009
    • Table 5.2: Trends in Export Growth (%), 2007
    • Exchange Rate Risk
    • Currency Risk
    • Myopia
    • Support Services for Exporters
    • Business Links
    • Export Credit
    • Table 5.3: Receivables Management Services Used by Exporters (%), 2007
    • Banks and Small Exporter Advice
    • Table 5.4: Businesses Using Banks for Advice (% of Firms), 2002, 2006 and 2007
    • Exports Credit Guarantee Department
    • The Euro
  • 6. Sources of Finance
    • Market Share
    • Bank Loans
    • Table 6.1: Sources of External Finance for Smes (%), 1997-1999 and 2009
    • Table 6.2: Sources of External Finance for Manufacturing
    • and Service Sector Smes (%), 2009
    • Bank Lending to Small Businesses
    • Table 6.3: Major British Banks' Assistance to Small Businesses
    • (Million, £bn and %), Years Ending December 2004-2009
    • Table 6.4: Major British Banks' Term Lending to Small Businesses
    • with A Turnover of £1m (£m), Monthly Change 2007-2009
    • Table 6.5: Overdrafts Granted by Major British Banks
    • to Small Businesses (£m), 2007-2009
    • Table 6.6: Deposits by Small Businesses in Major British Banks (£m), 2007-2009
    • Bank Small Business Activity in Deprived Areas
    • Table 6.7: UK Banks' Support for Small Businesses
    • in Deprived Areas (£m, % and Number), June 2005-2009
    • Other Sources of Finance
    • Margins and Provisions
    • Trade Credit
    • Hire Purchase and Leasing
    • Equity Capital
    • Small Businesses & Banks Contents
    • Venture Capital
    • Table 6.8: UK Investment by Venture Capital Companies by Financing Stage
    • (Number of Companies Invested in and %), 2006-2008
    • Table 6.9: Average Amount Invested by Financing Stage in The UK (£000), 2006-2008
    • Corporate Venturing Scheme
    • Business Angels
  • 7. Suppliers
    • Banking Costs
    • Table 7.1: Business Current Accounts in The UK, 2010
    • Small Business Banking Introductory Offers
    • Table 7.2: Introductory Offers on Business Banking, February 2010
    • Rules Governing Bank Lending to Smes
    • The Lending Code
    • Non-Payment of Debts
    • Banks' Promises to Small Business
    • Bank Market Shares
    • Table 7.3: Market Share of Small-Business Main Accounts by Bank (%), 2009
    • Financial Needs
    • Table 7.4: How Finance Has Developed over 2009 (%)
    • Table 7.5: How Finance Could Be Improved by Size of Firm
    • (% of Responses), Fpb Survey 2009
    • Bank Relationships
    • Small Businesses & Banks Suppliers
    • Financial Ombudsman Service
  • 8. An International Perspective
    • Eu Economy
    • Table 8.1: Key Phb Economic Expectations (%), 2007-2010
    • Support of Lender
    • Importance of Investment for Increasing Profitability
    • European Smes
    • Regulation
    • Sources of External Funding
    • Contents Small Businesses & Banks
  • 9. Pest Analysis
    • Political Factors
    • Economic Factors
    • Social Factors
    • Technological Factors
  • 10. Small Business Dynamics: Attitudes
    • Overview
    • Obstacles to Success
    • Table 10.1: Main Obstacles to The Success of The Business
    • (Number and % of Respondents), 2007/2008-September 2009
    • Sectoral Obstacles to Success, September 2009
    • Table 10.2: Main Obstacles to The Success of The Business
    • (Number and % of Respondents), September 2009
    • Causes of Cashflow Difficulties
    • Table 10.3: Causes of Cashflow Difficulties (Number and % of Respondents),2007/2008-September 2009
    • Whether Late Payment Is A Problem, by Sector
    • Table 10.4: Whether Late Payment Is A Problem by Sector (Number and %
    • of Respondents), 2007/2008, December 2008 and September 2009
    • Importance of External Finance
    • Table 10.5: Importance of External Finance (Number and % of Respondents),
    • December 2008-September 2009
    • Table 10.6: Trends in Seeking External Finance over Previous
    • 6 Months (% of Respondents), 2007/2008-September 2009
    • Reasons for Seeking Finance
    • Table 10.7: Reasons for Seeking Finance (Number and % of Respondents),2007/2008-September 2009
    • Types of Finance Sought
    • Table 10.8: Types of Finance Sought by Sector
    • (Number and % of Respondents), 2009
    • Difficulties in Obtaining Finance
    • Table 10.9: Trends in Whether There Was Any Difficulty Obtaining Finance
    • from The First Source Approached (Number and % of Respondents),2007/2008-September 2009
    • Changes to Terms and Conditions on Overdrafts in The Last 6 Months
    • Table 10.10: Changes to Terms and Conditions on Overdrafts in The Last 6 Months
    • (Number and % of Respondents), December 2008-September 2009
    • Small Businesses & Banks Contents
    • Existing Bank Lending
    • Table 10.11: Changes to Terms and Conditions on Bank Loans in The Last 6 Months
    • (Number and % of Respondents), December 2008-September 2009
    • Relationship with The Bank
    • Table 10.12: Relationship with Bank (Number and % of Respondents),
    • December 2008-September 2009
    • Factoring
    • Trade Credit Insurance
    • Hmrc Business Payment Support Service
    • Sme Attitudes towards Hmrc Services
    • Table 10.13: View of Hmrc Service (Number and % of Respondents),
    • December 2008-September 2009
    • Real Help for Business Now
    • Table 10.14: Awareness and Usage of Real Help for Businesses Now
    • Services/Measures (Number and % of Respondents), 2009
  • 11. Company Profiles
    • Barclays Plc
    • Corporate Strategy
    • Strengths and Weaknesses
    • New Product and Brand Development
    • Marketing
    • Distribution
    • Profitability
    • Table 11.1: Financial Results for Barclays Plc (£000, Number, % and £),
    • Years Ending 31st December 2007-2009
    • Future Company Developments
    • Hsbc Group Plc
    • Corporate Strategy
    • Strengths and Weaknesses
    • Marketing
    • Distribution
    • Profitability
    • Table 11.2: Financial Results for Hsbc Bank Plc (£000, Number, % and £),
    • Years Ending 31st December 2006-2008
    • Future Company Developments
    • Contents Small Businesses & Banks
    • Lloyds Banking Group Plc
    • Corporate Strategy
    • Strengths and Weaknesses
    • New Product and Brand Development
    • Marketing
    • Distribution
    • Profitability
    • Table 11.3: Financial Results for Lloyds Banking Group Plc
    • (£000, Number, % and £), Years Ending 31st December 2007-2009
    • Future Company Developments
    • The Royal Bank of Scotland Group Plc
    • Corporate Strategy
    • Strengths and Weaknesses
    • New Product and Brand Development
    • Marketing
    • Distribution
    • Profitability
    • Table 11.4: Financial Results for The Royal Bank of Scotland Group Plc
    • (£000, Number, % and £), Years Ending 31st December 2007-2009
    • Future Company Developments
    • Santander UK Plc
    • Corporate Strategy
    • Strengths and Weaknesses
    • New Product and Brand Developments
    • Marketing
    • Distribution
    • Profitability
    • Table 11.5: Financial Results for Santander UK Plc (£000, Number, % and £),
    • Years Ending 31st December 2006-2008
    • Future Company Developments
  • 12. The Future
    • The Economy
    • Population
    • Table 12.1: Forecast UK Resident Population by Sex (000), Mid-Years 2010-2014
    • Gross Domestic Product
    • Table 12.2: Forecast UK Growth in Gross Domestic Product
    • in Real Terms (%), 2010-2014
    • Small Businesses & Banks Contents
    • Inflation
    • Table 12.3: Forecast UK Rate of Inflation (%), 2010-2014
    • Unemployment
    • Table 12.4: Forecast Actual Number of Unemployed Persons
    • in The UK (Million), 2010-2014
    • Forecasts to 2014
    • Table 12.5: Number of Enterprises in The UK by Industry, Start 2008 and 2014
    • Small-Business Financial Sources
    • Table 12.6: Sources of External Finance for Smes (%), 2010 and 2014
    • Small Business Bank Lending and Deposits
    • Table 12.7: Major British Banks' Assistance to Small Businesses (Million, £bn and %),
    • Years Ending December 2009-2014
    • Enterprise Finance Guarantee Scheme
    • Table 12.8: Forecast Enterprise Guarantee Scheme by Source of Funds
    • (%), 2010-2014
    • Changes in Regulations
    • Regional Development
    • Insolvency
    • The Impact of The Recession and of The Financial Crisis
    • Conclusion
  • 13. Further Sources
    • Associations
    • Publications
    • General Sources
    • Government Sources
    • Other Sources
    • Key Note Sources
    • Key Note Research
  • The Key Note Range of Reports
+44 20 8816 8548

Ask a question about Small Businesses & Banks

Enter the characters you see in the picture below
Captcha