UK banking culture 'throttling' economic recovery
UK banks have been accused of 'throttling' the country's economic recovery because of an 'anti-business culture' and an 'obsession with short-term trading profits', business secretary Vince Cable has warned.
The statement comes as the Government faces mounting pressure to reform the banking system through the creation of new high street banks.
Vince Cable told the Andrew Marr Show that the Government was already acting to reform banking, adding: "I want to see more competition. It's a good idea and it's happening... we are creating a more competitive banking system."
"The real problem at the moment is that the banks - because of their existing culture, which is frankly anti-business, obsession with short-term trading profits, not focusing on the long term - are throttling the recovery of British industry," he said.
The banking system has come under fire from both the Government and the opposition following accusations over the fixing of inter-bank Libor rates.
Labour leader Ed Miliband said that the top high street banks should be sold off to create smaller 'challenger banks' to create wider competition in the sector and increase lending.
Research from the Federation of Private Businesses (FPB) indicates that one in five (20 per cent) business owners report a lack of choice when seeking finance. In addition, 17 per cent said they experienced difficulties in accessing any funding at all, also up by 11 per cent on the previous year.
Further, 17 per cent of owner-managers called for more distinctive lenders operating in the small business finance market, and 14 per cent a greater number of providers offering broadly the same service.
One in nine businesses told the FPB that improved access to finance would be very important in restoring business confidence.
The FPB's senior policy adviser Alex Jackman said: "Small business owners are likely to feel vindicated that the banks are being taken to task given the experiences they have had in recent years - but clearly mainstream lenders remain centrally important in their eyes.
"Entrepreneurs believe banks can do a lot better and are calling for improved levels of service, including more branches, faster and more transparent decision making and greater choice."
He added that although alternative forms of funding were regarded with caution, if improvements to the banking system were not delivered, business owners would explore 'newer' and 'more innovative' financial lenders.
Responding to Ed Miliband's call for 'challenger banks', director of policy for the British Chambers of Commerce (BCC) said: "Creating new banks is one way of driving up competition and choice, but on its own, it will not solve the funding gap faced by new and growing firms. The creation of a dedicated business bank would ensure that new and growing companies can access the finance they need to develop new products and services, export to new markets, and take on more staff."