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End the phoney war on banks
Place North West | 16th February 2011

Another week, and another series of announcements from politicians about bankers' bonuses and what measures the government are to take to whip our financial services institutions into shape.

The reality is that there is more chance of David Cameron being given the freedom of the city by Liverpool, than the government imposing effective barriers that prevent banks from paying their staff whatever they want, however they want. Not only do we live in a global economy, but we are dealing with an industry sector which is a master at inventing processes that can move cash in ways that suit their clients - and when necessary themselves!

More importantly though, whether we like it or not, the UK economy is heavily reliant on what has become one of our strongest sectors, London establishing itself as a leading player on the world stage as far as financial services go. The fallout between politicians and bankers during the past three years is already denting that hard won reputation. A recent report showed that during that time more than 24,000 top financiers left Britain or its financial services industry. A combination of bad press and an uncompetitive tax regime are said to be the principle reasons for this exodus.

You can't tax those who don't work here. And 50% of nowt, is nowt!

Bashing bankers may make great headlines for the masters of political spin. But in practical business terms, this chest beating and tough talk doesn't get a dish washed. It is time for politicians to call a halt to this phoney war, restore some confidence in our banking sector, and focus on getting our financial institutions to support SMEs more effectively.

It is not only the issue of getting banks to lend but getting them to lend with reasonable terms. Some of the charges and guarantees being asked for are proving a significant barrier to growth for many businesses at the moment, and the reduction in service from Business Link, who did a decent job as a 'broker' between banks and many businesses, has further exacerbated the problem.

The proposals contained within this week's 'Merlin' initiative, including the target of £191bn worth of lending to businesses, a 6% increase on last year, are welcome. But the banks need to 'show us the money' before the existing skepticism around the willingness of them to lend, and act more reasonably, will be abated. However, undermining what has become a lucrative market not just for the individuals involved but for the UK generally is not the way to achieve this. Instead, a mature dialogue, with realistic objectives, and a more flexible approach to business financing that includes the encouragement of business to seek alternative forms of finance, such as venture capital support, is preferable to the 'bark without bite' strategy that has failed miserably for our government so far.