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The Federation of Small Businesses has warned the City watchdog that its examination of lenders’ use of personal guarantees risks undermining confidence in it, in a letter seen by Sky News.

By Mark Kleinman, City editor @MarkKleinmanSky


The leading representative body for small businesses in Britain has criticised the City watchdog over its approach to a ‘super-complaint’ about lenders’ demand for personal guarantees.

Sky News has obtained a letter from Martin McTague, national chair of the Federation of Small Businesses (FSB), to the Financial Conduct Authority (FCA) competition chief Sheldon Mills in which he argues that the FCA risks “losing the confidence of small businesses” by focusing too narrowly in its analysis of the issue.

The ‘super-complaint’ filed by the FSB – the first since it was granted the power to do so a decade ago – was lodged amid concerns that small business-owners were being deterred from applying for bank loans by personal guarantee demands.

This could, it argued, have an impact on the wider UK economy by impeding the growth of businesses by diminishing demand for credit.

In his letter to Mr Mills, sent last week, Mr McTague said the FCA’s “decision to limit the scope of your evidence-gathering fundamentally, and I’m afraid deliberately, excludes the more than 1m limited company directors in the UK that run their small businesses by being incorporated”.

“Personal guarantees, where used properly, undoubtedly have a legitimate role in enabling business lending,” he added.

“However, excessive use of personal guarantees when lending to limited companies can deter investment, which in turn undermines productivity.”

In its public response to the ‘super-complaint’, the FCA said its “ability to investigate and act is restricted” by its regulatory perimeter.


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Craig Beaumont, chief of external affairs at the FSB, said: “The FCA’s decision to side-step the core issue – the banks’ increasingly blanket use of personal guarantees for UK small companies – is disappointing.

“It is not dissimilar to historic banking scandals where each regulator in this area acknowledges there’s a problem, but quietly retreats and leaves a large group of small business owners exposed – this time, nearly 1m limited company directors.

“It’s a ‘not me, Guv’ approach to regulating; a missed opportunity to improve the lending market.

“Small businesses deserve better and we are seeing what other options are available to us now the FCA has said it’s walking off the pitch.”

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