The UK’s umbrella companies and limited companies may be amongst the many small enterprises suffering from discriminatory and unfair banking practises, according to former Liberal Democrat Treasury spokesman Lord Oakeshott.

Lord Oakeshott was speaking after data from the Bank of England revealed massive discrepancies between interest rates paid by small companies and big firms. The figures show that a large company borrowing £20 million will generally be required to pay an interest rate of around 1.78 per cent, whereas SMEs are generally required to pay a stinging 3.69 per cent on a far smaller amount (£1 million).

These discrepancies make a mockery of attempts to solve the UK’s lending crisis, Lord Oakeshott believes, and suggest that the banks are choking the prospects for economic recovery rather than enhancing them. He urged the coalition to put immediate pressure on the banks if it truly wants to help small firms lead the recovery – many, he fears, will seize up entirely unless the government acts.

Net lending to UK firms has actually been falling significantly in recent months, according to the British Banking Association, which recently produced figures showing that it fell by £4.6 million in February and by £4.7 million in March. In response to these trends, some expert commentators, such as business strategist John de Groot, have advised small firms to explore other ways of obtaining finance, including approaching friends and family.

Lord Oakeshott’s comments will strike a chord with many SMEs; whether the government has the influence to make any impact on banking practises, however, remains open to question.

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