SMALL firms in and around Chester can help keep the area’s economy afloat in the face of looming government spending cuts, according to a leading business organisation.
West Cheshire & North Wales Chamber of Commerce believes small and medium-sized enterprises (SMEs) will play an increasingly vital role in creating jobs and growth following the coalition’s comprehensive spending review on October 20, which is widely expected to result in public sector job cuts.
However, Chamber bosses have warned that banks must begin offering accessible and affordable credit if SMEs are to thrive. The warning comes after latest Bank of England figures revealed that lending to small businesses across the country fell for the fifth month in a row in July.
Colin Brew, general manager of West Cheshire & North Wales Chamber of Commerce, said: “With public sector cutbacks on the way, the onus is well and truly on the private sector to help avoid a double-dip recession.
“I have no doubt that the private sector is up to the challenge, but two years after the financial crisis the lack of affordable finance remains the principal obstacle to growth.”
Business secretary Vince Cable told the recent Liberal Democrat conference in Liverpool that there was a 'compelling case' for new taxes on banks that fail to lend to small and medium-sized enterprises (SMEs).
Mr Brew welcomed the comments, but that added that the problem was more complicated than a straightforward ‘refusal’ to lend.
He said: “Many of our members – especially smaller firms – have been offered credit but only at extortionate and unaffordable repayment rates. It’s overly simplistic to say that banks simply aren’t lending; they are offering companies loans but the onerous interest rates and terms and conditions put the deal beyond the reach of many. They simply can’t afford to pay it back.”
Mr Brew added that another problem was the length of time it can take for loan applications to be processed.
“In the pre-credit crunch days a business owner could walk into the bank, apply for a loan and have it approved by the manager there and then. Increasingly what were previously routine applications have to be sent to head office for approval, which can cause significant delays. By the time the application has been approved, the business opportunity has all too often gone.”
West Cheshire & North Wales Chamber of Commerce represents 90,000 employees across the region. Based in Chester, its members range from large corporate PLCs to owner-managed businesses in a range of sectors.
Commenting on the coalition government’s plan to reduce the budget deficit, Mr Brew said that while he supported the focus on spending cuts as opposed to tax rises, austerity measures must be accompanied by support for businesses to enable them to deliver growth and create jobs. A key feature of this support should be a reduction in red tape for start-ups and smaller companies, he said.
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