Speaking to Reuters, Luke Johnson explains how small companies are being held back by a lack of available credit, even when they’re the type of businesses that could prosper in a recession.
Luke Johnson is therefore calling for a panel of experts to be set up to look into why this is happening.
“I think particularly with the government-owned banks, they have to drill down deeply and probably form a panel of experts to try and analyse externally exactly why there are these widespread complaints that banks are reducing lending to small businesses on the ground,” Luke Johnson explains.
Luke Johnson – who is head of private equity house Risk Capital Partners and one of the key entrepreneurs behind the success of Pizza Express, Giraffe and Patisserie Valerie – believes that there could be a number of reasons why lending had dried up, but the excuses so far aren’t good enough.
“I’m not a banking expert, so there are lots of technical issues, and I can’t pretend I have a simple, quick, single answer,” Luke Johnson continues. “Credit must get flowing to the smaller companies sector. It isn’t at the moment, I believe, in many cases.”
Luke Johnson isn’t alone in being frustrated at the banks. Although the government owns large stakes in Lloyds Banking Group and RBS, there is rising anger from both the public and officials that they and other banks aren’t lending more to SMEs.
Mounting anger is leading to calls that the large banks should be broken up. The idea, which small business minister Mark Prisk is partial to, is that more competition from smaller banks will help SMEs access finance.
We’ll be looking at the pros and cons of breaking up the banks in the next issue of Real Business – make sure you look out for it in the November issue.