Banks Accused Of 'Despicable' Lack Of Lending

By Poppy Trowbridge, Business and Economics Correspondent

Britain's banks are ruining the country's fledgling businesses by withdrawing funding, according to the author of a scathing dossier.

Lawrence Tomlinson, entrepreneur in residence at the Department for Business, Innovation and Skills (BIS), has provided the Business Secretary with evidence of alleged misconduct towards companies by the lenders, including the government-backed Royal Bank of Scotland and Lloyds Banking Group.

"The behaviour we have uncovered has been pretty despicable really," he told Sky News.

"We have seen peoples' businesses and peoples' livelihoods being destroyed, rather than being supported, by banks."

A spokesman for Vince Cable said he has "repeatedly made clear his concern"

Mr Tomlinson said he was aware of cases in which businesses were deterred from accessing finance before even being given the chance to apply.

Other cases documented how businesses were charged what he called "astronomical" fees and consequently put into financial distress.

Mr Tomlinson said his findings are backed up by ex-bankers who claim the issues occur at an institutional level.

Responding to the report, RBS, which is about 80% owned by the taxpayer, said it was the largest lender to small and medium-sized enterprises (SMEs) in the UK.

"We have established an independent review of our lending standards and practices to identify steps we can take to support even more SMEs and play our part in securing the economic recovery," it added.

Lloyds Banking Group, nearly 40% held by taxpayers, said it is growing lending to SMEs, adding: "Our net lending growth is 5% year-on-year, even though it has been falling by 3% across the banking industry. We are accepting eight out of 10 applications for finance."

Meanwhile, a BIS spokesman said Mr Cable had "repeatedly made clear his concern" about the level of support the banks are offering.

"He has seen the case studies Lawrence Tomlinson has compiled and finds them worrying, particularly the apparent reluctance amongst businesses to speak out," the spokesman said.

"A number of these cases involve RBS and the Secretary of State has asked (for them to) be considered under the independent review of lending practices that the bank has recently announced."

Since the financial crisis, banks have had to put more cash aside to meet tougher safety demands by regulators.

This has partly constrained the amount of capital they have been willing to lend to individuals and small and medium-sized firms.

However, latest figures suggest the lending squeeze may be lifting.

The Bank of England says lending to small businesses rose by £238m between May and June - the biggest monthly rise since the data was first recorded in 2011.

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