Can Darling and Mandelson provide a timely boost to small businesses?
In a move that will be welcomed by insurance brokers, Chancellor of the Exchequer Alistair Darling and business secretary Peter Mandelson are set to meet representatives from the major banks to discuss the issue of increasing lending to small businesses. With the economic climate worsening, banks are more reluctant to finance small businesses, but Darling and Mandelson will be putting pressure on them to increase small business lending to last year’s level of £53 billion.
The two cabinet heavyweights should not really have to be reminding the banks to cooperate. One of the conditions of the recent bail out of some of the leading financial institutions was that they had to maintain last year’s level of funding to small businesses. But it seems the banks – despite having the British taxpayer to thank for their continued existence – are not playing ball. Mandelson recently expressed his concern that small businesses were having their access to finance restricted as well having higher charges imposed on them by the banks.
Insurance brokers will be hoping that Darling and Mandelson knock the banks into shape. The worry for brokers is that, if small businesses are denied access to finance, it could mean that they opt to not purchase cover. It’s a simple equation – if small businesses are short of cash there is a strong possibility that brokers will see their income drop.
The British Insurance Brokers Association is well aware of this potential problem. The association’s chief executive Eric Galbraith recently wrote to the Government urging it to take action. In his letter to the business minister Baroness Vadera, Galbraith warned that, in addition to foregoing insurance cover, small businesses may take action that will “reduce or invalidate their cover such as putting off maintenance of property and vehicles”.
He added that small business could be left unprotected in the event of theft, vandalism, flood or fire. In the interests of the insurance broking community, let’s hope that Darling and Mandelson get the bankers by the scruff of the neck and force them to increase lending to small businesses.
