14 November 2018

Better Small Business Banking Could Deliver A £70bn Boost To The UK Economy

  • A new improved approach to business banking could increase the productivity of small businesses by up to 10% in every corner of the UK
  • But few small businesses think they are getting good value from their bank – 47% believe they pay an unfair amount in business banking charges

TSB is publishing flagship research in Parliament today on the impact of better banking and business services on the productivity of British SMEs. At an event hosted by the All-Party Parliamentary Group on Fair Business Banking, TSB will launch its Boosting Local Business' report which reveals that giving small businesses access to the products, tools and advice they need could deliver a 10% increase in their productivity and boost UK GDP by up to £70bn.1

Boosting SME productivity rates is crucial to the UK economy, but SME productivity is flatlining and is now just half that of the UK’s largest companies.

The report, which is based on research from Oxford Economics and YouGov shows that:

Few small businesses feel they get value from their bank.

  • Under half (49%) of SMEs believe that their bank understands their needs and 42% of SMEs think that the performance of their bank is holding their business back.2
  • 47% of small businesses believe that they pay an unfair amount in business banking charges.3
  • Over two thirds of SMEs (68%) believe that their needs are being overlooked in favour of larger, more profitable companies.4
  • Just a quarter (24%) of small businesses say they have access to advice, tools and services that give their business the confidence to be more digital.5
  • 60 per cent have no idea what services their bank can offer to help them become more productive.6

This is resulting in low take up of services that can help small businesses start, run and grow their businesses.

  • Our research reveals that under two thirds of SMEs are using accountancy software (62 per cent), payroll software (59 per cent) or invoicing software (57 per cent). Just over half (53 per cent) use tax software and only 40% use expense management software.7
  • Meanwhile, just under half (46 per cent) use digital marketing software, and for businesses with 1-9 employees, that number drops to just 11 per cent.8

A new approach to business banking could transform the productivity of small businesses.

In order to remove the barriers to ambition for our nation’s SMEs:

  • Banks should improve their small business offer, to help small businesses all around the UK access best-in-class technology and business services.
  • Banks should help provide access to local advice and support to help small businesses manage and grow their businesses.
  • Banks should come clean on fees and charges by offering greater transparency and fairer pricing practices for small businesses.
  • Banks and regulators need to put greater focus on helping small businesses to borrow well and provide them with the protection they need should they get into financial distress.

Giving SMEs new options of improved banking and business support services could unlock productivity; creating time savings for business owners, as well as opportunities for growth. If all small businesses in Britain realised these productivity gains it could deliver up to £70bn boost to UK GVA. Even if only one in ten small businesses were to benefit from better banking and business support, the impact on our economy would be significant.

TSB’s SME Banking Director, Richard Davies, says: “Small businesses are the beating heart of our local communities, but as our research shows, more needs to be done to help them start, run and grow."

“At TSB, we hope that by unveiling key opportunities to help small businesses, and committing to rolling out a new business banking offer over the coming months, we will be able to play our part in unlocking this huge potential for the UK.”

Martin Whitfield MP, Vice-Chair of the All-Party Parliamentary Group on Fair Business Banking, says: “This is an important report which shines a light on the worryingly low levels of confidence amongst the SME community and the regional disparities in SME productivity. It shows that a new relationship between banks and businesses is not only possible but profitable too. A relationship which focuses on giving SMEs the local support and guidance they need to grow and which offers them the financial services they require to exploit the digital age”.

1 Oxford Economics, research conducted for TSB – survey of 550 small businesses, Jan-Feb 2018. £70bn uplift estimate represents the maximum uplift if all small businesses in the UK benefitted to the full extent.
2 Ibid
3 YouGov, survey conducted on behalf of TSB, poll of 612 small businesses (March 2018)
4 Oxford Economics, research conducted for TSB – survey of 550 small businesses, Jan-Feb 2018
5 YouGov, survey conducted on behalf of TSB, poll of 612 small businesses (March 2018)
6 Ibid
7 Oxford Economics, research conducted for TSB – survey of 550 small businesses, Jan-Feb 2018
8 Ibid

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Notes to editors

Boosting Local Business is an analysis of research, commissioned by TSB, carried out by Oxford Economics in a survey of 550 UK small businesses (Jan – Feb 2018) and by YouGov in a poll of 612 senior decision makers in Small businesses (i.e. less than 50 employees). Fieldwork was undertaken between 12th - 16th March 2018. The survey was carried out online. The figures have been weighted and are representative British business size.

TSB supports over 100,000 small banking customers across the UK and is improving its business banking offer with a multi-million pound investment already underway as it prepares its bid for the Capability and Innovation Fund and Incentivised Switching Scheme.

Earlier this year, TSB partnered with Enterprise Nation, the UK’s most active small business network, to help boost the digital capability of small businesses and entrepreneurs across the UK – giving small businesses access to the advice and support they need to help them grow. TSB recently launched Funding Options, a one-stop-shop which will give small businesses the means to easily compare financing options from a number of lenders in one place. TSB is working on several other partnerships to be announced over the coming months to help meet a range of business needs.

 

TSB recently appointed regional teams of dedicated SME Relationship Managers across the UK, specialising in supporting small businesses and entrepreneurs in their local communities. The local team will give business banking customers simple, clear and fairly-priced banking products and services that will ultimately help local businesses and communities thrive.

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