Entrepreneur and leading academic in joint call for greater RBS role in avoiding UK SME sector collapse

By April 23, 2020

Robert D. Kilgour

Chancellor must consider all tools – including RBS nationalisation – to ramp up SME lending from banks

Entrepreneur and founder of one of the UK’s largest care home providers Robert D Kilgour has collaborated with international finance expert and Chair of Macroeconomics and International Finance at the University of Glasgow’s Adam Smith Business School, Ronald MacDonald OBE to call on the Chancellor to force banks to lend more to SMEs. If necessary, that should be done through direct control of state equity in the UK’s largest high street branch network owned by RBS.

In a newly published analysis paper the pair argue that failure to act decisively now will lead to widespread insolvencies in the SME sector, which employs three fifths of workers and accounts for around £1.1 trillion, half of current turnover in the UK private sector.

According to estimates released last week, banks had so far lent £1.1 billion to just 6,000 of the UK’s 5.3 million SMEs, showing an apparent blockage in access to finance for smaller companies.[1] The pair stress that if lending under the Coronavirus Business Interruption Loan Scheme (CBILS) does not increase rapidly then the Chancellor should consider fully nationalising the bank as a means to direct its UK-wide network of high street branches to expand SME support and encourage other major lenders to follow suit.

Robert D. Kilgour commented:

“As businesses continue to support front line NHS and care services by maintaining the lockdown, they need to know that there is light at the end of the tunnel in the form of a working economy to come back to. That means they need the banks to step up SME lending in the short term, something that so far isn’t happening at anything like the required level.

“Total lending by all banks has been a trickle, just when companies need it the most and the worry amongst businesses is that lenders are putting profits before the wider health of the economy.

“If that’s the case, the Chancellor needs to act urgently, by forcing banks to lend if necessary. Given that the Treasury already owns a majority stake in one of our biggest business lenders, RBS, it should be in a position to mandate far higher levels of lending immediately. And if that doesn’t work, he should be prepared to explore taking a 100% stake in RBS if, in the short term, that serves to free up cheap credit and encourage all lenders to engage seriously with business owners in urgent need of help.”

The paper argues that as a first step the Chancellor should increase the proportion of Treasury guarantee for SME loans up to £25,000 from the current 80% to 90% in order to reduce some, but not all, risk from lenders’ balance sheets.

Professor Ronald MacDonald commented:

“SMEs comprise more than 99% of businesses across the UK but as things stand the support they are receiving from lenders is well below what’s needed to provide a rapid economic recovery from the current crisis.

“The fact is that credit is available to banks and governments alike at historically low interest rates but it’s government here in the UK that is doing all of the heavy lifting to support the real economy through this unprecedented crisis. The banks need to show that they understand the need to support businesses with far greater access to CBILS loans. And this seems especially important given the considerable uncertainty over when the shutdown of much of the UK economy will end.

“Full nationalisation of RBS shouldn’t be done lightly, but should be amongst a suite of responses explored by the Treasury, together with broader credit guarantees for all lenders, to open up lending to struggling small businesses before many go to the wall.”

The analysis paper is summarised below. A full copy is accessible at by clicking here.

Notes to editors

Media: Peter Smyth, Indigo – petersmyth@indigopr.com / 07766 166 637

Robert D. Kilgour

A successful entrepreneur with 38 years’ experience in growing businesses in Scotland and across the UK, Robert founded Four Seasons Health Care Plc, developing it from its roots in Fife into the UK’s fifth largest care home provider with 101 homes throughout the UK, employing over 6,500 staff. Four Seasons is now one of the leading care home operators in the UK with over 260 homes, around 17,000 beds and 25,000 staff.

Robert is CEO of Dow Investments Plc, Chairman of Renaissance Care (Scotland) Ltd and a Director of its subsidiaries. He also holds board level appointments at a number of other companies involved in property and the SME sector.

Professor Ronald MacDonald OBE

Ronald is Chair of Macroeconomics and International Finance at the Adam Smith Business School in the University of Glasgow. His research is published in the economics profession’s leading journals and he has over 18,000 citations recorded on Google Scholar.

Ronald has also acted as an adviser and consultant to governments, international regulators and global companies, including the European Commission, General Secretariat for Development Planning of Qatar, the National Audit Office, the World Bank, the IMF, Credit Suisse First Boston and Royal Bank of Scotland. He has served as an expert witness to various committees of the Scottish Parliament, the House of Commons Scottish Affairs Committee and the House of Lords Economic Affairs Committee. He consistently ranks in the top 1% of the IDEAS/ RePec ranking of over 50,000 economists in the world.

Sharing risk and reward: Shielding the UK SME sector – Summary

Following the decision of the UK government to announce enhanced social distancing measures on 20 March, Chancellor of the Exchequer Rishi Sunak’s £330 billion package of response including loans, tax relief, cash grants and employee salary support, was broadly welcomed by the business community.

However, the uptake of loans to small and medium sized enterprises (SMEs) under the Coronavirus Business Interruption Loan Scheme (CBILS) has been modest, with many companies complaining that a range of factors has prevented them from accessing credit on equitable terms.

This paper proposes that the Chancellor should consider reshaping the loan scheme by:

  1. Increasing the proportion of CBLIS loans up to £25,000 underwritten by HM Treasury from 80% to 90% as a means of substantially reducing the risk faced by banks in lending to SMEs.
  2. Exercise HM Treasury’s leverage as the majority shareholder in RBS to mandate the bank, as one of the UK’s largest business lenders, to support SMEs on a far bigger scale than we have seen hitherto.
  3. Retain the option to complete the nationalisation of RBS if this is what it takes to accelerate competition amongst UK lenders on terms that are accessible to SMEs which need help now.

In our view these measures in combination have the capacity to increase lending to SMEs to levels needed to avoid a collapse in the sector in the wake of the coronavirus crisis, while encouraging the banks to play their part in helping rather than hindering a rapid recovery.


Thursday 23 April 2020

[1] Source – BCC Coronavirus Business Impact Tracker: 15 April 2020: https://www.britishchambers.org.uk/news/2020/04/bcc-coronavirus-business-impact-tracker-two-thirds-of-respondents-awaiting-funds-from-furlough-scheme-as-payday-approaches