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2014 Budget must address bank SME lending fall

News of a billion-pound decline in bank SME lending in 2013 underlines the need for greater support for small businesses and non-bank SME finance in the 2014 Budget.

According to new figures from the Bank of England, despite significant incentives, small business lending under the Funding for Lending scheme fell by £1.3 billion between April and December 2013. The cut in SME lending was most marked at the Royal Bank of Scotland and Nationwide.

The Federation of Small Businesses has urged the government to focus on creating the right environment for small business growth in the 2014 Budget. In the light of the Bank of England data, a priority must be greater engagement with and promotion of non-bank SME lending, such as invoice finance and peer-to-peer lending.

Tellingly, the Federation wants the government to act on the focus and delivery of existing SME lending initiatives, and makes the point that such efforts will allow the country to benefit from rising business sector confidence.

Another area of small business finance that the government would do well to address is business rates. The business rate system has come under fresh attack from the BIS Committee of MPs, which has labelled it a threat to retailers. The British Retail Consortium has recently called for a root and branch review of the system.

As the build-up to the 2014 Budget commences, it is already clear that small business lending, and in particular the non-bank products that are providing SMEs with a financial lifeline, must be a key focus.

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