For small businesses to thrive we need a fair banking system

There’s an increasing understanding across all parties of the absolutely vital role that small businesses play in driving our economy forward.

Though their voices often get drowned out by the biggest players in the private sector, over 99% of businesses are small or medium sized businesses, employing fewer than 250 people. 

In Scotland there are around 339,000‘micro-businesses’ – employing fewer than 10 employees –  these companies account for 95% of all Scottish businesses.

When you consider these numbers it’s not hard to see why this has been a major area of focus for the Scottish Government.

The Small Business Bonus Scheme and the First Minister’s commitment to making public sector contracts more accessible to small firms are significant measures we’ve been able to take forward in Scotland.

However vital policy issues on financial regulation remain reserved to Westminster. It’s important to consider the bigger picture and understand that smaller business can be more vulnerable to volatile conditions.

A lot more work needs to be done to ensure the regulatory environment in which these businesses operate is shaped to reflect their needs.

These factors were at the forefront of my thinking when I decided to take up an offer to chair the All Party Parliamentary Group (APPG) on Fair Business Banking at Westminster.

The group is made up of 110 MPs and Peers from across the political parties and engages with external experts to flag up major problems in the business banking sector.

My decision to chair the group was also based on witnessing the appalling impact that the mis-selling of financial products can have on individuals who run businesses within the constituency.

We also know small businesses play a particularly significant role in creating jobs and growth in rural parts of Scotland like the Borders.

Currently the regulatory environment that governs business banking favours the banks rather than businesses themselves.

For example, predatory ‘vulture funds’ can currently buy up commercial lending contracts, in processes that often see otherwise healthy business go to the wall for no reason other than the short term gain of commercial banks. 

The roots of these practices lie in weak protections and regulations – allowing big players in the financial services sector to consistently place their own interests above those of the real economy.

The APPG on Fair Business Banking has a successful track record challenging this kind of misconduct.

After the interest rate hedging product scandal of 2012 the group was instrumental in the set up of a landmark Financial Conduct Authority scheme that has provided billions of pounds worth of compensation to thousands of affected business.

I want to use my new role build on this successful track record. We still need to create a system that allows businesses better access to justice and we’ve already debated bringing in a new Financial Tribunal System.

People starting up a business ought to be able to expect a level playing field and fairness is absolutely essential to creating the kind of sustainable economic growth that we can all benefit from.