Small businesses have seen no benefit from the introduction of government lending schemes, making the introduction of a small business bank more imperative than ever, according to a new report.
Despite the introduction of the National Loan Guarantee scheme and Funding for Lending, the number of rejected loan applications has increased, rising from 40.6% in Q1 to 42.4% in Q3, according to figures from the Federation of Small Businesses.
The lack of loans had also impacted on SMEs' growth plans with the majority retaining the same levels of investment expenditure as the previous quarter.
Infographic showing some of the highlights from the FSB report
John Walker, chairman of the Federation for Small Businesses, said while he was pleased the chancellor was looking to break the "financial deadlock" small firms continue to face when looking for funding, the government's policies must be built on plans for longevity, rather than seeking a quick win.
"While understandably the details are still sketchy, to make this a success it is essential that the final proposals are well thought through," he said.
"Whatever its final form, government must design this institution for the long-term and not just as a short-term
measure.
"We believe this could be the first step to creating an institution that is at the heart of government, which champions small businesses and covers issues including exports, regulation and procurement. After all, it has worked well in the US, one of the world’s most dynamic markets, for nearly 60 years."
Last quarter, Walker had warned that any rays of hope for the economy and the SME sector were likely to dwindle without government assistance.
"What small businesses need – especially in such perilous times – is policymakers having a strong sense of conviction. What we do not need is the introduction of short-term schemes that help too few, too little, and which only prolong the damaging climate of uncertainty," he said at the time.
But it appears Walker's warnings went unheeded. The FSB third quarterly Voice of Small Business report, published today, found despite the Olympics and the Royal Jubilee, small business owners' confidence levels had worsened.
Business services and manufacturing are among the strongest parts of the small business sector, but those reliant on customers spending spare cash on non-essential items - hotels and leisure businesses for example - suffered another slow quarter.
Revenues continued to fall across small businesses, largely driven by the continued suffering of eurozone export partners.
Export prospects are also deteriorating, increasingly putting small firms in the same position as other exporters that have seen falling sales.
The net balance of firms reporting an increase in foreign sales has fallen from 11.3% in Q1 2012 to 1% by Q3.
And 13.3% expect a significant slowdown in overseas business, which for the first time is higher than the number of firms expecting a significant increase in sales abroad.
Only the East Midlands and London reported a improved sentiment rating, meaning 10 out of the 12 regions covered by the report were remaining negative.