Press Releases
November 2011
Listen out for small firm credit details in Autumn Statement, advises Rickard Keen
Essex-based chartered accountancy firm Rickard Keen is advising small and medium-sized business owners to pay close attention to Chancellor George Osborne's Autumn Statement later this month for details of how the lack of credit available to their sector could be addressed.
Mr Osborne hinted during the recent Conservative Party conference that a bond arrangement for smaller firms was one of the possible options being looked at by the Treasury, which is currently working on a ‘credit easing' scheme to inject money directly into parts of the economy which require it. The measure was specifically targeted at SMEs.
Although the Chancellor gave very little detail, it is thought that the idea would involve corporate bonds issued by smaller firms, with a repayment guarantee or re-financing commitment improving the attractiveness of such instruments to investors.
The scheme, if it went ahead, could increase the scope and depth of the UK's corporate funding market, as well as offering a partial solution to the problems many SMEs face obtaining credit.
Managing Partner Alan Worsdale, who is a member of the Chartered Institute of Taxation (CIOT) and the Institute of Chartered Accountants in England and Wales (ICAEW), said it was likely that further details of such a scheme would be given more flesh, when Mr Osborne gives his Autumn Statement on 29 November in response to the Office for Budget Responsibility's update of its growth forecasts.
He said: "George Osborne didn't give away much detail at all at the conference; he just dropped it into his speech.
"However, he seemed to be implying that bond arrangements – under which large firms are able to sell their debt direct to investors – could be introduced for SMEs, who are currently unable to issue their own corporate bonds because of the way these bonds are rated for creditworthiness.
"Bank credit in its various forms is likely to remain the main source of funding for smaller firms. But there are other options for easing the supply of credit, including, further refinements to the old Load Guarantee Scheme for smaller firms, refinancing existing bank debt, perhaps with the Government as guarantor, or by setting up a new institution.
"Of course, even if these facilities were available, would business owners necessarily be rushing out to take advantage? The message we are hearing from our clients is that firms are still very cautious about investing at the moment because of the uncertain market conditions.
"However, what we have been trying to get across is that, even though the economy remains difficult, there are still good opportunities out there for well-run and innovative businesses.
"If an idea such as corporate bonds helps SMEs to make positive business investment decisions, then that can only be a good thing.
"Businesses should pay close attention to Mr Osborne's Autumn Statement at the end of the month to see what further details he reveals."