MPs launch inquiry into SME finance

3rd July 2023

The cross-party Treasury Committee has launched an inquiry into the challenges faced by small businesses when seeking finance.

In the wide-ranging new inquiry, the MPs will investigate the accessibility of finance, the role of financial innovation in business lending, and the role of the Bank of England’s Term Funding Scheme, credit reference agencies and Government state aid in encouraging small business lending.

The Committee will also explore whether SMEs have adequate access to a complaints procedure for disputes with banks or lenders, the effectiveness of the Business Banking Resolution Service, whether business lending should be regulated, the impact of Basel 3.1 reforms on access to finance, and the performance of the Financial Ombudsman Service (FOS) in handling complaints.

The MPs are also set to consider the role the Government can play in enhancing access to small business finance, the impact of covid schemes on businesses, and the role of the British Business Bank.

Commenting on the new inquiry, Harriett Baldwin MP, Chair of the Treasury Committee, said “Small businesses are the lifeblood of local communities, powering economic growth and fostering innovation and an entrepreneurial spirit. As a Committee, we’ll be examining whether small businesses are able to access the finance they need to grow and develop, whether there is adequate regulation of the sector, and if Government can take a more active role to support business growth.”

“We look forward to receiving written evidence on this important topic and taking oral evidence later in the year.”

Anna Roughley, Head of Insight at the Lending Standards Board (LSB) said SMEs have had a relentlessly difficult few years. As the pandemic that barred many from trading petered out, business owners were walloped with rapid inflation and a subsequent rise in interest rates. These factors had the pincer effect of squeezing margins and reducing the spending power of would-be customers. The road to recovery for SMEs has proved to be long – and bumpy.”


“The LSB oversees the only set of Standards for banks and lenders that are designed to ensure good outcomes for SME customers, even during the most challenging landscapes. Now, more than ever, the industry must ensure the focus is on ensuring no SME gets left behind.”


“For example, there is large cohort of SME lending customers who would define themselves as either having a disability or a long-term medical condition. Out of the country’s working age population, 33 per cent report having a long-term health problem, 20 per cent a disability and 8 per cent a severe disability. It is important this cohort receives the support they may require in accessing business banking, which is why we have worked with registered firms and lenders extensively over the last year, ensuring they are driving financial inclusion for all.”

The Committee is seeking evidence on:

  • What are the key challenges Small Medium-sized Enterprises (SMEs) face when seeking finance?
  • Through which channels do SMEs find the most success when seeking funding and why?
  • What role can financial innovation play in SME finance? Is there more the government and the regulators can do to improve access to finance through innovative firms?
  • How accessible is finance for SMEs of different sizes?
  • Is finance available to allow SMEs to scale up from venture capital funding?
  • How successful has the Bank of England’s Term Funding Scheme with additional incentives for SMEs (TFSME) been at encouraging banks to lend to SMEs?
  • What role do credit reference agencies play in supporting SME finance?
  • What impact has the RBS bailout state aid Alternative Remedies Package and its various funds for SMEs (implemented by Banking Competition Remedies Ltd) had on SME access to finance?
  • Is securing access to SME finance particularly challenging for women, people from ethnic minorities, people from certain social classes, or any other group? Is so, what should be done about it?

Regulatory issues

  • Do SMEs have adequate and appropriate access to a complaints procedure when in dispute with their bank or lender?
  • How effective has the Lending Standards Board’s Standards of Lending Practice been?
  • How well does the Financial Ombudsman Service (FOS) work for small business complaints?
  • Is the FOS’s existing role in SME finance appropriate? If not, how should it change?
  • How effective has the Business Banking Resolution Service been, and what lessons can be learnt from it?
  • Should SMEs have the same level of consumer protection and deposit insurance limits as retail consumers?
  • Should commercial lending to SMEs be brought into the regulatory perimeter?
  • What impact will the PRA’s proposed Basel 3.1 capital requirements framework, and in particular the proposed removal of the SME support factor, have on SMEs in the context of the PRA’s objectives?

Government policy issues

  • Should the Government do more to enhance SME access to finance? And, if so, what?
  • What has the impact of the Covid Bounceback Loan Scheme (BBLS) which was followed by the Recovery Loan Scheme, been on SME finance?
  • In the US the Treasury approved a fund, (State Small Business Credit Initiative (SSBCI)) for incentivising and supporting underserved businesses. Does the UK need similar provisions?
  • How useful is the British Business Bank? Does its finance hub improve SME access to finance?