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Sunday, 23 November 2008

RBS lending pledge to small firms - Can we believe this?

Well that's alright then, all SME's banking with RBS or NatWest will have their overdrafts protected and see no bank charges rises for a year. All other big banks exepcted to follow according to the media.

Given we now own 60% (or so I am told) of RBS you wonder if there will be a socialist banking agenda next year or so. Will Gordon and Alistair apply the sames logic and ineptitude to RBS as they have to the wider economic problems?

"We are a government committed to tax and spend, in this global economic crisis" says Gordon "Its RIGHT to SPEND our way out of recession"....is it? Really? I don't think giving a drunk man more drink would be seen as a cure by anybody with some wit?

So why do that to an inebriated economy that has been partying for 14 years? "Here, have another, its only money"!

Getting back to the main theme here, imagine if you will, a struggling company that cannot pay the wages and salaries next month? When Mr Small Businessman goes to the bank and asks for another £50,000 overdraft will RBS be forced to lend it? No I thought not.

The fact that the cost of his non existent overdraft won't go up though, is ok. Actually its irrelevant. Most banks got rid of most SME overdrafts a long time ago, they encouraged factoring instead because in insolvency they have more security over an assigned book debt than plain vanilla overdraft security.

Isn't it amazing that Government has finally discovered the SME agenda? Can this be the same Government that announced in its last budget that it was increasing corporation tax for all companies making under £300,000pa? Oops, that'll be the same small businesses that they all of a sudden want banks to lend to?

Oh I get it, these small businesses need the cashflow to pay Corporation Tax, PAYE and VAT of course. So let's get the banks to lend to SME's coz the Government has a cashflow problem!

Mixed messages here, but seems to me we are all being taken for mugs in the SME world, we may generate 53% of GDP according to The Federation of Small Business (don't quite see how the maths works there) but my clients tell me they cannot get overdrafts, factoring, loans or banks that will even return a call!

My message to government.... stay the hell out of SME businesses, let the market work this recession out and let the poorly run, badly managed businesses out there get taken over or fail. Oh and start containing spending- not increasing it.

Will they listen? NO! They will be bribing people with tax and VAT cuts on 24th November to encourage SPENDING, but its my guess that people won't want to spend their way to oblivion, they are too worried about their jobs, houses and livelihoods. Most people I know want to save now.

So this week will be a hugely important one for the politicians and SME business alike.

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