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Good morning, everyone. I’m David Postings, Chief Executive of UK Finance.

It’s great to be able to open day two of our Commercial Finance Conference in the heart of Canary Wharf.

But I want to start today by taking you out of the UK’s financial centre, out of London entirely, and instead think about a family-run farm in Shropshire, owned by a farmer named Ben.

As well as running a working dairy farm, Ben welcomes visitors to meet the animals on his farm and serves hot drinks and homemade cakes in the tearoom.

Tourism is one of the biggest sources of income for Ben’s business and naturally, the Covid pandemic hit him and his family hard – costing him about 75 per cent of his annual tourism income in 2020.

Fortunately, Ben was given a bounceback loan. The cash helped him and his family through the pandemic and today they are still open for business and welcoming customers.

It is so easy to focus on abuse of the bounceback scheme, but actually what we did was provide thousands of businesses like this farm in Shropshire with a lifeline, a chance to carry on. We helped protect the economy and people’s livelihoods.

On top of the mountain of support and forbearance provided to thousands of businesses, our industry lent almost £80 billion through the Covid schemes. Our support is estimated to have saved up to 2.9 million jobs.  

Small businesses are at the heart of our economy, responsible for 60 per cent of employment and 70 per cent of net job creation. We had a collective determination and collaborated with key stakeholders like the government to get these schemes up and running at lightning speed. This meant we could support businesses effectively.

But today, our small businesses face a different set of challenges.

We now find ourselves in a rising interest rate environment. We all know that the cost of living and of doing business has risen. And more SMEs have borrowing legacies leftover from the pandemic.

The banking and finance industry is committed to lending where possible, and doing so responsibly.

In April this year, our industry provided over £22 billion of new business lending.  Over £5 billion of this lending was to SMEs. That’s just in one month.  

However, we also need to have a mature conversation about how the economic environment is impacting the affordability of borrowing.  

Conditions remain challenging for many SMEs and we need to recognise that. Alongside the huge levels of support banks continue to provide, there are an increasing number of applications for finance that banks cannot support.

This can create resentment and a negative feeling.

It is important that lenders, government and customer groups work together to ensure that interventions to support customers who can’t access all the finance they initially asked for is effective. 

To do so, we need to recognise the breadth of business types within the umbrella term ‘SME’. 

Within this umbrella term there are many diverse sectors, family businesses, lifestyle businesses as well as those trying to become more corporate and grow significantly. There are hundreds of thousands of charities and community organisations. In addition, roughly 750,000 brand new businesses start up every year in the UK. 

There is a referral scheme in place so that an application for finance can lead to a “yes” when the original lender said “no”.

Looking at where we are now, we should look to ensure we include Community Development Financial Institutions in the scheme, for those ventures that mainstream lending does not traditionally reach. Those who call for a more interventionist approach to lending should consider that today’s “funding for growth” can quickly turn into tomorrow’s “unsustainable debt burden”. As ever, balance and judgement are needed.

I have real concerns about the incoming Consumer Duty. I have voiced my worries elsewhere in the mortgage-lending space.

While it does not apply for all SMEs, it is vital that Consumer Duty expectations for businesses are not just a direct extension of those for retail customers. Because these sets of customers are very different.

Consumer Duty means that lenders need to demonstrate that customers understand the pros and cons of each product. Deciding what a good outcome is for really small businesses will be complex and open to retrospection. I fear that this will result in product withdrawal in order to avoid problems down the line.

We are also travelling down a road of increasing regulation to reach Net Zero.

While UK Finance and the industry are fully behind a just transition to Net Zero, I also foresee some unintended consequences of regulations here.

There is a risk that lenders increasingly need to see ESG plans to be able to lend. For some businesses, these plans simply won’t exist.

Banks are rightly under pressure to understand if they’re financing sustainable businesses, but this does represent a hurdle for SMEs who might not have the experience or capacity to demonstrate their carbon footprint.

This could mean lenders pulling back from smaller businesses and industries like haulage. Many trucking companies do not have viable transition plans. If these businesses are excluded from finance, supply chains will fall down. I think it is important that we fund the transition to net zero as opposed to greening balance sheets. UK Finance will be undertaking more work on this subject during the year and we plan to issue a report with recommendations for all stakeholders around the year end.

Despite these challenges, for everyday business owners, their confidence in the industry comes from everyone here – and the service you provide to companies up and down the country.

I am proud of our industry and the support we have given to our business customers, particularly since we last all met at this conference in person.

I know that we will continue to work together and lean into the challenges of today. But importantly, lenders and regulators can best help when we appreciate that each business is individual – rather than treating SMEs as one single group.

I think that today promises to be a great event and I hope you get a lot out of it. Its great to see you. Enjoy the day

Thank you