Thursday, July 18, 2013

Reuters: Small Business News: ECB takes lending step to help small business

Reuters: Small Business News
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ECB takes lending step to help small business
Jul 18th 2013, 15:05

By Paul Carrel and Sakari Suoninen

FRANKFURT | Thu Jul 18, 2013 11:05am EDT

FRANKFURT (Reuters) - The European Central Bank moved on Thursday to get more money to the euro zone's struggling small businesses, letting banks use more of the assets once blamed for triggering the financial crisis as collateral for cheap loans.

The ECB said it was expanding the list of asset-backed securities (ABS) that are eligible for use at its refinancing operations - the facilities banks use to tap the central bank for liquid funds - and reducing the discounts it applies to these assets.

Blamed for triggering the financial chaos that toppled banks and sucked in countries, ABS - which are assets like loans bundled up together - have been undergoing a makeover in Europe where the ECB has backed an initiative requiring a loan-by-loan breakdown in ABS offered as security.

Thursday's move offers hope for small- and medium-sized enterprises (SMEs) that banks will have more funds with which to offer them loans. But it unlikely to be a game changer for these businesses, many of which are cash-strapped and struggling to grow.

Under the collateral changes, the ECB will lower the required credit rating on the "plain vanilla" brand of ABS for which it requires detailed information on the underlying assets - a step that reflects the increased transparency of this ABS.

The change will free up about 20 billion euros ($26 billion) in ABS for use as collateral.

However, this will be offset by a valuation markdown on so-called 'retained covered bonds', which banks issue and then hold themselves. The ECB regards these bonds as more risky.

"I think in the short run this is a tidying up exercise," RBS economist Richard Barwell said of the collateral changes.

To support European efforts to boost lending to smaller firms, the ECB said it was also looking at possibly accepting as collateral ABS that are linked to SME loans and guaranteed by European institutions or national development banks.

Barwell added that this "medium term discussion ... is good news because we can get a little bit more positive on the prospects of a positive solution to the SME problem. But still the key to solving that problem must be fixing the banks."

European efforts to create a banking union with a joint supervisor, a resolution authority for winding up zombie banks and a common insurance scheme are stalling as governments squabble over the design of the plan, and the costs attached.

Small- and medium-sized businesses in the euro zone are more reliant on banks for funding than those in the United States. A dearth of funding makes it harder for SMEs to grow their businesses, holding back a recovery in the 17-country bloc.

The collateral changes will allow banks to offer up more ABS as collateral for ECB funds, freeing them of the securitized assets for which there is still little investor demand and - in theory - giving them more scope to lend to firms.

"Favoring asset-backed securities, which includes some backed by SME loans, could help a bit to ease the credit conditions for SMEs in the (euro zone) periphery," said Berenberg bank economist Christian Schulz, describing the move as a "small step".

(Editing by Jeremy Gaunt)

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Friday, July 12, 2013

Reuters: Small Business News: Insight: Fast-growing U.S. craft brewers struggle with worker safety

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Insight: Fast-growing U.S. craft brewers struggle with worker safety
Jul 12th 2013, 18:12

An undated family handout photo shows Mark Moynihan working on his home beer brewing system in Knoxville, Tennessee. REUTERS/Courtesy of the Moynihan Family/Handout via Reuters

An undated family handout photo shows Mark Moynihan working on his home beer brewing system in Knoxville, Tennessee.

Credit: Reuters/Courtesy of the Moynihan Family/Handout via Reuters

By M.B. Pell

NEW YORK | Fri Jul 12, 2013 2:12pm EDT

NEW YORK (Reuters) - Welder Mark Moynihan crawled down a narrow tube into a space the size of a car interior to seal the crack in the fermentation tank at Calhoun's Bar-B-Q & Brewery in Knoxville, Tennessee.

The space was oversaturated with oxygen. He lit his torch, and a flash-fire erupted. His hair and clothing disintegrated instantly.

Moynihan, a contractor for the craft brewery, dragged himself up the tube and out of the vat while still on fire, suffering serious burns over much of his body. He died 75 days after the 2009 accident, just before his 40th birthday, said his widow, Kim Moynihan.

It was not an isolated incident.

From 2009 through 2012, at least four people died in craft brewery accidents in the United States, compared with two deaths at large breweries that make 10 times more beer, according to a Reuters analysis of federal Occupational Safety and Health Administration data and local media reports.

There were also nearly four times as many safety violations at craft breweries in recent years than at large breweries. And brewery experts say the safety oversight at smaller companies is worse than official statistics might suggest because injuries, even severe ones, often go unreported.

"It was horrific," Kim Moynihan said. "It was an accident, but it was an avoidable accident."

She sued Copper Cellar, claiming the owner of the brewery and a small chain of Calhoun's restaurants in the Knoxville area created a dangerous work environment, according to court documents. She settled for an undisclosed amount but said she could not discuss the settlement further because of a nondisclosure agreement.

Nicholas J. Chase, a lawyer at Egerton, McAfee, Armistead & Davis representing Copper Cellar, said neither he nor his client could comment on the accident because the agreement might prohibit it. He said he was unable to immediately provide further details of the agreement.

OVERLOOKED SAFETY

The craft brewing industry has grown from a niche market 20 years ago into a $10.2 billion business in 2012, according to the Boulder, Colorado-based Brewers Association, which represents 1,797 U.S. craft and larger beer makers. The association is not aware of safety issues unique to the craft brewing industry, Chris Swersey, its technical brewing projects coordinator, said in an email to Reuters.

Matt Stinchfield, a brewery safety consultant for insurance companies, said that as the industry scrambles to meet the exploding demand for craft beer, employee safety has sometimes been overlooked. "You have a few eager entrepreneurial spirits, and they don't come with an industrial safety background," he said. "There is still some growing up to do."

Brewers Association board member Gary Fish said craft brewers sometime struggled with safety, as many other small manufacturers do.

Haste causes accidents, and pressure to meet demand causes haste, said Fish, who is the founder and CEO of Deschutes Brewery in Bend, Oregon. "It's a challenge everywhere," he said. "I don't think anyone is deemphasizing safety."

State inspectors and OSHA found 547 violations, including 250 serious ones, at craft breweries from 2003 through 2011, according Reuters' analysis of the data. Officials fined the small brewers an aggregate $220,000 for violations ranging from failing to enclose sprockets and chains to not ensuring machinery was disabled when an employee was inside.

By comparison, large brewers, such as Anheuser-Busch and Coors, had 151 violations, including 69 serious ones, during the same period.

OSHA officials declined to comment.

The Brewers Association defines a craft brewery as one that makes 6 million barrels of beer a year or less, with less than 25 percent of the company owned by an alcoholic drink maker that is not a craft brewer. Traditional recipes are also required.

To be sure, the differences in fatality and violation figures partly reflect the larger breweries' greater automation and resources to spend on safety programs, as well as - in many cases - their more extensive experience.

Safety experts say the workplace fatalities are avoidable.

Last year, for example, an employee of Redhook Brewery in Portsmouth, New Hampshire, died when a keg he was cleaning with compressed air exploded and hit him. An OSHA investigation found the air line lacked a device that would keep the pressure in the keg at safe levels. The brewery's owner, the Craft Brew Alliance, was fined $44,000 for that and a series of other safety violations.

Sebastian Pastore, vice president of operations for the Craft Brew Alliance, said the incident was a "freak accident" involving a plastic keg dropped off by a customer to be refilled.

The company subsequently re-examined safety issues at the brewery. It has stopped filling plastic kegs and hired an outside consultant to review safety procedures at its breweries. It now has a dedicated safety consultant for the Portsmouth brewery.

FEW INJURIES REPORTED

Despite the number of violations and deaths, OSHA data only shows two serious injuries at craft breweries since 2002, both at the same one. Two workers were burned in separate incidents at Ballast Point Brewing Co in San Diego in July 2010 and August 2010.

Since then, the company has not had one hospitalized injury despite a fivefold increase in production and employees, said Chief Financial Officer Rick Morgan.

The number of injuries reported to OSHA does not reflect the number of injured employees, consultant Stinchfield said. This is because brewers often do not know that many states require them to report serious injuries.

He knows of four burn cases that were never reported. Each required skin grafts and months of treatment.

In one of those cases, Teri Fahrendorf was working her first job as a rookie brewmaster at a now-closed San Francisco brewery in 1989 when she used a kettle that was too small to cook wort, a pre-beer solution.

The boiling wort spilled out of the kettle and into Fahrendorf's knee-high rubber boots. Doctors took strips of skin from her head to graft onto her foot, she said.

Now Fahrendorf promotes safety standards in the industry as founder and president of the Pink Boots Society, a nonprofit organization dedicated to helping women succeed in brewing. Fahrendorf said the brewery did not report the incident, and it does not appear in OSHA data.

She said she had lacked promised safety and other training. Craft breweries, she said, "don't have experience with big-boy chemicals, and they don't have experience with pots that are filled with 900 gallons of boiling liquid."

TANK EXPLOSION

Bridgewater, Vermont-based Long Trail Brewing Co and its Otter Creek Brewing subsidiary are two of only three U.S. craft brewers participating in a stringent OSHA safety program.

They joined the program, investing millions of dollars in upgrading equipment, developing safety policies and hiring a safety officer, after a 2011 fermentation tank explosion.

The blast did not injure anyone, but was a wake-up call, said Jed Nelson, a Long Trail Brewing Co director.

There are signs of a shift in the industry's attitudes, said Dan Drown, an industrial chemical safety consultant who has been working with craft brewers in San Diego for the last five years.

At least 250 people attended a safety lecture at a craft brewing conference in San Diego last year, he said. More companies also are paying for safety training and classes.

"They are maturing," he said.

The widow, Kim Moynihan, hopes that is true.

"I know it was an accident, but I believe if the employees received proper training, this would not have happened," she said. "I think they just overlook it."

(Edited by Maurice Tamman, Martin Howell and Lisa Von Ahn)

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Tuesday, July 9, 2013

Reuters: Small Business News: Small business confidence slips in June

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Small business confidence slips in June
Jul 9th 2013, 11:33

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A woman searches through shelves in a grocery store in Brooklyn, New York August 27, 2011. REUTERS/Brendan McDermid

A woman searches through shelves in a grocery store in Brooklyn, New York August 27, 2011.

Credit: Reuters/Brendan McDermid

By Paige Gance

WASHINGTON | Tue Jul 9, 2013 7:33am EDT

WASHINGTON (Reuters) - Small business optimism fell in June from its one-year high as an uncertain recovery continues to unfold.

The National Federation of Independent Business said on Tuesday its Small Business Optimism Index decreased 0.9 point to 93.5 last month, changing course from two straight months of growth.

Six of the index's 10 components fell and two were unchanged. Only job creation plans and the six-month outlook advanced.

This mirrors economists' predictions that the economy will pick up momentum in the second half of this year after a lackluster start.

More owners are reporting negative sales trends than positive ones. "Nothing cheers up a small business owner more than a customer, and they remain scarce and cautious," the NFIB said.

Last month, the share of owners planning to increase inventories fell 4 points, accounting for about 40 percent of the decline in the index.

Job creation plans increased after slipping last month and the percentage of small business owners reporting they could not fill job openings remained the same.

The NFIB reported earlier this month that small business employment ticked down by 0.09 workers per firm. An almost equal proportion of owners hired as opposed to cut jobs, but those firms reducing employment more than offset the gains at other businesses.

(Reporting by Paige Gance; Editing by Andrea Ricci)

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We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/

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Friday, July 5, 2013

Reuters: Small Business News: UK seeks fairer share for small firms from outsourcing 'oligopoly'

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UK seeks fairer share for small firms from outsourcing 'oligopoly'
Jul 5th 2013, 14:27

By Christine Murray

LONDON | Fri Jul 5, 2013 10:27am EDT

LONDON (Reuters) - When a modest IT firm in southern England won a 13-million pound local authority contract in 1988, it was a huge coup for a business that had annual revenue of just 4.3 million pounds.

Nowadays that company has annual revenue of 3.4 billion pounds thanks to its dominance of the public sector services market - and Britain's government thinks it's time that Capita (CPI.L) returned some of that business to smaller firms.

"We have an oligopoly," said Bill Crothers, the government officer charged with overseeing all central government contracts. "We have a huge concentration of business in relatively few suppliers."

Outsourcing public sector services to private companies has been a controversial issue in Britain since former prime minister Margaret Thatcher introduced compulsory competitive tendering in the 1980s. That forced local authorities to give private firms the chance to run everything from councils' IT systems to hospitals and rubbish collection.

As a result the public services market boomed and is now worth 93 billion pounds, according to figures from market analyst Kable. That makes it second only in size to the U.S. market, says data analyst Information Services Group. Capita, along with Serco (SRP.L) which runs NHS health centers, enjoyed double-digit growth for two decades until the current austerity-focused coalition government was elected in 2010.

Now outsourcing is controversial again, with a recession-weary public quick to get angry about private sector payouts given curbs on welfare spending and bleak growth forecasts.

So David Cameron's government is taking aim at the big contractors to both answer voters' calls for a fairer marketplace and to boost the economy by passing more money to small and medium-sized companies (SMEs) - those with fewer than 250 employees and a turnover of less than 50 million euros.

Cameron terms SMEs the engine of economic growth and wants them handling 25 percent of all government contracts by 2015.

Even Rod Aldridge, co-founder of Capita, says change is due. SMEs can't compete in the current climate given the 25-year-old relationships built up between bigger firms and local councils.

"The industry has now got a problem," said Aldridge, who now runs an education foundation. "Lots of small specialists..can't bid for some of the things which are out there. The government is worried because you haven't got competition."

NEW PRACTICES

Policymakers started changing the landscape earlier this year. In April the Bank of England revamped its "Funding for Lending" scheme to persuade risk-averse banks to lend to credit-starved small businesses.

Now central government is introducing new procurement practices, with the emphasis on smaller and shorter contracts. Extensions and add-ons - which can multiply the size of a deal several times over - are now banned, and a contract limit of 100 million pounds has been introduced, although Crothers conceded this was more a "direction" than an edict.

Britain's competition watchdog is to examine whether government's biggest IT providers like HP (HPQ.N) and CapGemini (CAPP.PA) as well as Capita win too great a share of public contracts.

And government officials are examining outsourcing firms' profit margins, comparing public and private sector work to ensure they are in line, said Crothers, a former consultant at U.S. outsourcing specialist Accenture.

"If we can see that another market in the UK, a company's private sector clients, are paying a lower price or yielding a lower margin than we are, then something's not right."

SMEs are also taking action to increase their chances of winning contracts. Acknowledging the size and experience of the big firms, many of them are scaling up to compete.

IT firm Invenio already competes with and often wins against major IT firms in the private sector. After three years of not winning public sector business the company, which builds tax management software, partnered up with a major government supplier that they declined to name. Invenio is now in advanced discussions to provide its software to HMRC, in what would be its first UK public sector deal, and hopes to win more.

"SMEs can provide so many things but are never considered seriously," Invenio managing director Partho Bhattacharya said. "I think we are seeing the start of a change. When an SME wins business against a big company they have something special to offer and someone takes the risk and can see that special thing."

David Ascott, a corporate finance partner at Grant Thornton who focuses on business services and private equity, forecast the strongest pickup in activity among mid-sized firms providing services like security and cleaning.

"Structurally it's an unusual industry because you've got lots of big guys then not a lot in the middle. There's probably more consolidation to come in that segment of the market - the creation of another one or two larger players rather than big ones buying them," he said.

UPHILL BATTLE

One fact is incontestable: both large and small outsourcing firms will be fighting over less money. The UK faces the deepest budget cuts in Europe over the next decade, according to the OECD, so cuts to local government budgets will likely continue.

That will probably make it even harder to persuade embattled local governments and departments to have faith in smaller, untested firms.

Contracts handed to SMEs can go awry, like a 90-million pound Ministry of Justice contract in 2011, which resulted in court translators failing to turn up and others mistranslating hearings to defendants.

The Ministry of Justice has since announced a tender process that favors bigger firms - 500 million pounds of probation services contracts in 21 regional chunks, with the idea that prime providers then subcontract.

And, as ever, the bigger firms will be able to bargain harder.

"(Capita) has got massive infrastructure," said Aldridge. "The economies of scale they've got from this is enormous. The margins that Capita gets come not from bidding for higher margin but from having the infrastructure."

(Editing by Sophie Walker)

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Wednesday, July 3, 2013

Reuters: Small Business News: Small business hiring falls again in June: NFIB

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Small business hiring falls again in June: NFIB
Jul 3rd 2013, 19:48

By Paige Gance

WASHINGTON | Wed Jul 3, 2013 3:48pm EDT

WASHINGTON (Reuters) - U.S. small business employment edged down for the second straight month in June, sharply contrasting with other data showing an improvement in the tone of the labor market last month.

The National Federation of Independent Business said the net change in employment ticked down by 0.09 workers per firm after slipping 0.04 in May.

"A higher percentage of the owners hired, but those that reduced employment made cuts large enough to put employment growth among existing firms in the red," the NFIB said in a statement on Wednesday.

The NFIB's findings are at odds with other data that have painted a far more upbeat picture of the jobs market.

The ADP National Employment Report on Wednesday showed private employers added 188,000 jobs to their payrolls in June, a step up from the 134,000 positions created in May.

Employment in the service industries touched its highest level in four months in June, the Institute for Supply Management also said on Wednesday.

Added to that, first-time applications for state unemployment benefits held at lower levels for much of last month, giving hope to another month of steady job gains in June.

The NFIB survey found that 11 percent of small business owners throughout the country added an average of 3.6 workers per firm over the past few months.

About 12 percent reduced employment by an average of 4.3 workers. The share of business owners reporting few or no qualified applicants for job openings was 41 percent.

Small business hiring has been sluggish. There has been speculation that the Affordable Care Act, which compels employers with a staff complement of at least 50, was making some small business owners reluctant to add workers.

The Obama administration on Tuesday delayed the employer mandate of the legislation until 2015.

Economists at UBS in New York reckon the one-year delay could prompt small business owners to hire more workers.

"For those employers on the cusp of the 50 employee threshold this delay may prompt them to hire as they may be unwilling to continue to postpone hiring to avoid being subject to the mandate," UBS said in a research note.

(Reporting by Paige Gance; Editing by Chris Reese)

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Reuters: Small Business News: UK start-up investment website plans global expansion

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UK start-up investment website plans global expansion
Jul 3rd 2013, 15:58

By Kylie MacLellan

LONDON | Wed Jul 3, 2013 11:58am EDT

LONDON (Reuters) - A British website which allows members of the public to buy stakes in small businesses is planning to expand worldwide, aiming to create a global platform linking investors to firms in need of funds.

As banks rein in lending due to tougher capital rules and greater regulatory scrutiny, crowdfunding, which originated in the United States as a way to raise money for creative projects, has expanded rapidly as an alternative source of finance.

"The ultimate aim is to build a network of crowdfunding sites in 25 to 30 countries ... so the whole thing becomes a global investment platform," said Darren Westlake, chief executive and co-founder of Crowdcube, which says it is the world's largest equity crowdfunding site.

"How does crowdfunding succeed? The best way is to build the biggest crowd, and how do you build the biggest crowd? You do it on a global basis," said Westlake.

Westlake said Crowdcube, through which businesses have raised 9.3 million pounds ($14.1 million) since it launched in 2010, was working on several joint ventures following strong demand from others looking to set up similar sites.

It has launched in Sweden and Crowdcube Brazil should be up and running in the next six weeks, followed by Crowdcube Middle East in the Autumn. It is also looking at partnerships including in the United States, Canada, Australia, Mexico and India.

While crowdfunding originated in the United States, equity crowdfunding has grown more quickly in Britain as U.S. regulators are still to agree rules for the sector.

Of $2.7 billion raised by crowdfunding globally in 2012, only $116 million came from equity crowdfunding, a survey by research and advisory firm Massolution showed.

Crowdcube, which is regulated by Britain's Financial Conduct Authority, has more than 38,000 registered investors and is aiming to grow this to half a million in the next two years. ($1 = 0.6592 British pounds)

(Editing by David Holmes)

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Reuters: Small Business News: RBS commissions review of UK small business lending

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RBS commissions review of UK small business lending
Jul 3rd 2013, 11:28

Pedestrians walk past a Royal Bank of Scotland (RBS) branch in the City of London March 6, 2013. REUTERS/Toby Melville

Pedestrians walk past a Royal Bank of Scotland (RBS) branch in the City of London March 6, 2013.

Credit: Reuters/Toby Melville

By Matt Scuffham

LONDON | Wed Jul 3, 2013 7:28am EDT

LONDON (Reuters) - Royal Bank of Scotland (RBS) (RBS.L) has commissioned a review of its lending to small businesses, responding to concerns of a shortage of finance in a sector seen as vital to Britain's economic revival.

Britain's government and central bank are concerned that poor access to finance for smaller firms may thwart a sustainable recovery from the country's worst slump in decades.

Business lending has fallen despite the government's flagship Funding for Lending (FLS) scheme, which gives banks cheap funding to encourage them to offer credit.

Banks say they must balance demand to lend against the need to avoid the kind of reckless lending which resulted in Britain having to pump a combined 66 billion pounds ($100 billion) into RBS and Lloyds during the 2008 financial crisis.

RBS has come under particular political pressure because it is Britain's biggest small business lender and the government controls 81 percent of it.

The bank said it had appointed former Bank of England deputy governor Andrew Large and management consultants Oliver Wyman to conduct the review. It said the study would focus on what steps it could take to support small businesses and Britain's economic recovery while maintaining sound practices.

"Demand for lending remains a challenge, but we want to do more than just wait for demand to materialize," said Chris Sullivan, RBS's head of UK corporate banking. "We want to play our part in securing the recovery."

RBS's plans coincided with the Bank of England saying Britain's improved economic outlook had boosted demand for corporate credit in the second quarter. The availability of corporate credit, however, was expected to stay little changed.

"JURY OUT"

The central bank said this week that lending to smaller firms dropped by 452 million pounds ($685.71 million) in May and deputy governor Andrew Bailey told lawmakers the desire of British banks to offer credit was still in question.

"The answer they give is, they are increasing their capacity to make lending, and my answer to that is, that's good but I think the jury is very much out on this. I mean, we have to see the evidence on this," he said.

However, banks' assertion that they must avoid reckless lending was underlined by data from the Bank of England on Wednesday which showed a significant rise in default rates on small business loans in the second quarter.

The Bank of England had previously reported a 300 million pound fall in net lending by banks and building societies taking part in the FLS scheme in the first three months of 2013.

Stephen Hester, ousted as RBS chief executive last month, said in May the bank had 20 billion pounds of spare cash it was desperate to lend, but could not find takers because businesses lacked confidence in the British economy.

Last month, the bank said it had identified thousands of British companies it could offer 1.7 billion pounds ($2.6 billion) of extra credit to.

The Federation of Small Businesses said the RBS review should focus on helping small businesses better understand what information they needed to give when applying for credit. For example, it should direct businesses seeking credit to its sector-specific advice.

The British Chambers of Commerce called on other big lenders to follow RBS's lead.

($1 = 0.6592 British pounds)

(Editing by Pravin Char)

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