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Better Small Business Banking Could Deliver £2.5Bn Boost to the Welsh Economy

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TSB has published flagship research in Parliament on the impact of better banking and business services on the productivity of British SMEs. Boosting Local Business, based on research from Oxford Economics and YouGov, 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. In Wales this would equate to a £2.5bn increase to GDP.

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’s findings show that:

Few small businesses feel they get value from their bank.

  • For Welsh SMEs, the key concern (40%) with their business banking provider is that the fees and charges are too high.
  • Only half (51%) of SMEs in Wales believe that their bank understands their needs.
  • 40% of small businesses in Wales believe that they pay an unfair amount in business banking charges.
  • A third (30%) of Wales’ small businesses say they have access to advice, tools and services that give their business the confidence to be more digital.
  • 45% of Welsh SMEs have no idea what services their bank can offer to help them become more productive.
  • Across the UK, over two thirds of SMEs (68%) believe that their needs are being overlooked in favour of larger, more profitable companies.

Overall. this is resulting in low take up of services that can help small businesses across the UK to 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.
  • 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.

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 realised these productivity gains it could deliver a boost of up to £2.5bn to Welsh GVA and up to £70bn 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”.

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