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Research shows what UK SMEs really want from banks

Recent research from YouGov, the Telegraph and Yorkshire Bank shows that UK SMEs are experiencing high levels of confidence, and this affects how they deal with banks.

UK SMEs have money to invest but aren’t prepared to be overcharged on banking fees. And while only 11% say they want to switch banks, most want a better deal and service than their current bank provides.

UK SMEs should work with their bank

It’s no surprise that better services and rates make certain banks more attractive to UK SMEs. However, small and medium sized enterprises arguably have more power than ever before. We live in a time where SMEs can access finances in many different ways, and where the market has diversified hugely. Banks should understand that the personalised approach makes a big difference to smaller businesses.

The ideal relationship between a bank and SME should be collaborative, with the company working with the bank to analyse the best way to do business. Gavin Opperman, Group Business Banking Director for Yorkshire Bank, says: “In terms of how the business bank relationship can play a role, SMEs should also analyse their business together with their banker and advisors to identify any levers which can be pulled to free up cash, or any new markets that could further diversify their income base. This can hedge against economic uncertainty and reduce outgoings.”

Small businesses want better business rates

Just over 40% of respondents to the survey say they want better fee tariffs and interest rates. And a separate piece of research by the Federation of Small Businesses (FSB) shows why. Borrowing costs for SMEs have reached a four-year high, and this can be a major problem for small businesses.

However, while borrowing and banking in general is more expensive, few SMEs say they have problems accessing finance. More than 75% say they have sufficient access to financial sources when they need them. Encouragingly, only 4% of UK SMEs report that debt management adversely affects their company finances.

Financing options for small businesses have increased over the last ten years due to significant market development. For example, the launch of the British Business Bank increases funding supplies to smaller businesses. The rapid growth of the alternative finance industry, which offers solutions such as invoice finance, peer-to-peer lending and crowd-funding has also increase options for SMEs.

Businesses better prepared following financial crisis

As well as these significant changes within the market, there is also the legacy following the financial crisis of 2008. This encouraged businesses to ensure they build up cash reserves for operations and growth, so that they are prepared should they suddenly lose access to financial providers.

The Institute of Chartered Accountants in England and Wales (ICAEW) revealed in 2017 that 61% UK small businesses have a cash surplus.

James Turner, Managing Director of Turner Little Limited says: “We can assume that UK SMEs are focusing on building a cash surplus, particularly as we go through Brexit uncertainty. It does seem that, to a certain extent, smaller businesses in the country are delaying substantial investment until we have a clearer picture of how the country will be affected by leaving the EU.

“However, the report’s key findings include the fact that 39% of UK SMEs are not threatened by Brexit at all and say that they don’t think it will affect them in the slightest. This is encouraging news, as we move into the final phases of the negotiations with the EU, as this sort of resilience bodes well for the future of small businesses in the UK, whatever the final deal turns out to be.”

About Turner Little
Founded in 1998 in Yorkshire, UK, Turner Little is a specialist UK and offshore company formation, banking and corporate services provider. Our services include company formation, UK and offshore banking, asset protection, credit correction, trademarking and trusts. Other services include Internet services, mail forwarding, wills and probate. Turner Little’s vision is to offer the best possible service, together with market leading products.

Turner Little and its affiliates do not provide tax, legal or accounting advice. Material on this page has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.