Kevin Hollinrake is MP for Thirsk and Malton, Vice-Chair of the All Party Parliamentary Group for Fair Business Banking and co-Founder and Chair of national lettings and estate agency chain, Hunters.
Imagine setting up your own business from scratch; the early mornings, sleepless nights, the financial worries, the many personal sacrifices, until you reach the calmer waters of running a profitable business.
Along comes your bank and wrongly persuades you to take out a complex business loan whose repayment costs rise dramatically as interest rates fall.
This is what happened to my constituents, Jon and Kerry Welsby from Filey, who set up their own property business and whose monthly payments on their Lloyds Bank loan rose from £6,974 to £17,555, leading to their business failure in 2011.
The bank would only compensate the Welsby’s for the mis-sold product – not for the loss of the whole business.
Tens of thousands of other hardworking business people have been caught up in similar injustices including the scandals at RBS, where the banking regulator’s report revealed ‘systematic’ mistreatment of small firms.
What’s worse, is there is no effective means of redress – not only are the banks too big to fail but they are also too wealthy to sue.
Having spent 25 years of my life starting and building businesses, I know that small businesses are the backbone of our economy and access to finance is vital.
The UK is the leading nation within the EU for ‘start-ups’ but one of the worst for ‘scale-ups’
There must also be a level playing field between small and medium sized businesses and the banks. If businesses are mistreated by their banks, it will cost millions to take them to court.
We absolutely can’t have a situation when businesses won’t borrow because they are afraid of the risks.
The UK is the leading nation within the EU for ‘start-ups’ but one of the worst for ‘scale-ups’, partly because some businesses have become too afraid to seek the finance they need.
What we need is a Financial Services Tribunal that can tackle complex cases. The banks would fund it so it would be much cheaper for the claimant to bring an action and they would not have to pay the banks’ legal costs if they lost. As a result, lending would increase as confidence between banks and business returns.
It is win-win all round.
The APPG has secured a debate on the Treatment of SMEs by RBS/GRG on 18th January.