A survey released by the British Chambers of Commerce (BCC) showcases the falling levels of trust that businesses have in financial institutions.
The findings show that 49% of firms use banks or building societies for external finance, with only 10% using equity, and 8% using grants, venture capital, private equity, peer-to-peer lending and angel finance combined.
Commenting on the findings, John Longworth, Director General of the BCC, said:
“While it is right that the businesses consider other forms of funding, the results of this survey show that bank finance is, and will remain, the dominant source for businesses. Other BCC surveys conducted this year have shown companies’ concerns about access to working capital, and the impact of this, for example, on small businesses looking to export for the first time.”
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Despite the fact that banks and building societies are the main source of finance for companies, 50% of the 1,560 survey respondents state they lack trust in these financial institutions.
Furthermore, the survey revealed that 38% of businesses trust financial institutions less than they did a year ago, while 37% are not confident in securing external finance.
John Longworth added:
“Financial institutions need to rebuild trust and repair damaged relationships with businesses and improve transparency. Regulators should look to increase competition in the banking sector to ensure businesses have more choice, and the government must ensure that plans to create a British Business Bank mean more funds available to growing businesses. Six in ten companies would feel more confident in seeking finance if Britain had its own dedicated business bank.”
When questioned on Government backed finance schemes, 43% of firms said that had not heard of any of them. Commenting on these figures, Longworth said:
“Awareness and take-up of existing government support schemes, which are run through the banks, is extremely low, with the recent LIBOR and mis-selling scandals damaging confidence among businesses. While it is important to avoid stifling growth in financial services with over-regulation, the City’s primary role should be to oil the wheels of the economy, providing the patient capital businesses need to plan for the future and grow.”
