Smoke and Mirrors that Distort the Truth

Angus Dent
Posted by Angus Dent on 11-Nov-2019 00:15:00

Opinions may differ as to who originally coined the phrase “Lies, damned lies and statistics”, but, whoever it was, they were spot on. The expression has been in regular use for well over a century, yet we still see frequent examples of dubious numbers being applied to support or demolish particular arguments.

Take SME borrowing statistics. The British Business Bank’s (BBB’s) ‘Small Business Finance Market Report’ for 2018/19, published last February, revealed that, because of market uncertainty, SME borrowing over the previous year had slowed to the point where the level of debt repayment almost matched the gross amount of new finance raised. The report also stated that, although there was greater awareness of the finance alternatives available (e.g. 52% of SMEs were now aware of P2P loans), nearly three quarters of respondents would sooner forego growth than borrow at all.

The picture is slightly different for larger companies. As recently as September, the Bank of England’s Money and Credit Report for August revealed that, while SME borrowing was only up 0.7%, lending to larger businesses had risen by a more robust 4.4% - an instance of where, because the average loans are larger, the percentage increase translates into many more pounds sterling. Are we to conclude from the numbers that larger companies are more optimistic about the future, or that the banks – contrary to their publicly expressed desire to help smaller businesses – are quietly shifting their criteria to favour larger, arguably less risky, borrowers?   

We don’t know the answer to that for sure, but we do know that SMEs are less likely to approach their bank for fear of being turned away. Many don’t even bother to try – they’ve been there before, and not too long ago.

Meanwhile, the mighty HSBC recently announced that it had added £2bn to its Small Business Loan Fund, raising its total commitment to supporting UK SMEs to £60bn over a period of five years. The bank doesn’t reveal how much of last year’s £12bn has been taken up, or by how many borrowers, so we are unable to translate this ‘commitment’ into tangible figures. We are left to wonder whether the money has actually been deployed to worthy SMEs or if, after all, it has found its way to larger borrowers.

Finessing statistics to distort the truth should be outlawed, but I doubt it will happen.

Topics: business loans, FCA, lending, loans, p2p, sme, smes, uk, alternative finance, bank of england, hsbc#, British Business Bank

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