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London businesses urge Bank Of England not to limit SME lending

Friday 31 March 2023

The London Chamber of Commerce and Industry (LCCI) has urged the Treasury Minister, Andrew Griffith MP, to intervene with the Prudential Regulatory Authority (PRA) to ensure bank capital rules do not hold back lending to small and medium sized businesses.

The final package of what is known as the Basel international banking standards – or Basel 3 - would limit lending to small businesses as it removes favourable treatment for SME loans. This means that London businesses could have to face additional burdens in addition to dealing with rising energy bills and volatile markets.

Research data from the LCCI and London Councils at the end of 2022 showed that a fifth of London businesses regard the lack of access to finance as an immediate threat to their business.

Richard Burge, Chief Executive of the London Chamber of Commerce and Industry, said:

The bank capital rules are supposed to provide greater financial stability and inspire confidence in the financial markets. However, the proposed changes end up doing exactly the opposite, as it will hinder the growth of London SMEs – which are the lifeblood of the capital’s economy.

The Bank of England-led PRA proposals will make existing lending conditions even worse. By stripping out provisions for favourable lending conditions for small businesses, these firms would face even greater headwinds.

Regulatory changes that will further hinder small businesses’ ability to expand and grow is the wrong decision at the wrong time. That is why I have written to the Chair of the House of Commons Treasury Select Committee, Harriet Baldwin MP and to the Treasury Minister, Andrew Griffith MP to call for these concerns to be addressed. Businesses require HM Government to provide clarity and assurances that firms will be able to access working capital over the coming months and years.”

ENDS

Notes to Editors:

  • Research data from the LCCI and London Councils report can be found here.