In a speech to the Scottish CBI and Scottish Enterprise, the Governor discusses the problems of financing small businesses. Such businesses are an increasingly important sector of the economy and have been a significant source of employment growth. The Governor describes how, during the recession, the relationship between banks and small businesses has been strained. Small firms have seen banks as benefiting from their difficulties, but banks have seen the sector as unprofitable and problematic. The Governor suggests that one of the most important things that the authorities can do to improve the climate for both small firms and banks is to achieve and maintain a stable macroeconomic environment. But there are other areas in which progress can usefully be made. The Governor outlines the encouraging response from the series of meetings that the Bank has had with the CBI, small business representatives, a number of academic experts and the major retail banks. At these meetings there was a good measure of agreement on the nature of the issues and on how each party, together with the government, could contribute to improvements in this area. The Governor explains that no one single measure will bring a dramatic or sudden improvement, as there are many separate issues to be addressed to improve the financing of different small businesses with different needs; each will need a tailored approach. But the Governor says that, as a result of the discussions, he is reasonably confident that small firms will not be constrained by any general lack of availability of bank finance, and that many of the difficulties and misunderstandings that have arisen are being addressed. He says that the Bank will continue to review progress in this area.
Published on
01 March 1994
The financing of small firms