Photo by Robert Tudor on Unsplash

The United Kingdom government recently rejected “recommendations by the Treasury Select Committee that suggested stricter regulations on bank lending to small businesses (SMBs).” The move has created some controversy as small business supporting policymakers worry that this move will leave SMBs unprotected during lending relationships.

The reason for the controversy on the topic comes from a “government investigation into RBS [that] found…the bank unfairly pushed some small business clients into its Global Restructuring Group, leading to additional financial burdens and, in some cases, bankruptcy for some of those firms. Last October, RBS CEO Ross McEwan spoke with reporters, noting that a lack of industry regulation allowed such mistreatment against small businesses to occur.” At the time the issue gained global attention but has since been put on the back burner with Brexit taking the reigns of global importance.

The move is still being seen as a slight for SMBs

“The government and the FCA are betraying British businesses, while acknowledging they are the backbone of this country, because they are unwilling to take on the big banks,” said Nikki Turner, director of small business advocacy group the SME Alliance. “The idea that because the banks are not behaving as badly as they did a decade ago it’s all OK is like inviting Hannibal Lecter to dinner because he hasn’t killed anyone recently.”

And I agree. Too many times SMBs are tricked into accepting funding based on deceitful promises from unscrupulous lenders. Protections are need because of this and it is unfortunate that the UK government does not agree.