Margareta Pagano: Why won't the banks back small business?

Potentially lucrative opportunities are beckoning would-be exporters but they are frustrated because they cannot take advantage without funding

Michael Sheridan, one of Britain's top design experts, will be landing in China today to expand his fledgling Shanghai office. Mr Sheridan is a world leader in retail interiors. His company, Sheridan & Co, designs and makes the retail furniture that is used by luxury companies such as LVMH and Estée Lauder to sell their goods. His business is UK-based with a factory in Market Harborough, employing about 63 craftsmen, with another 30 or so people working in London and New York.

Business is going great guns. This year, Mr Sheridan will deal with more than 100 global brands, and sales will top £10m. He is expanding in Shanghai because he must be where the clients are. Companies such as Gucci and Procter & Gamble want his team on the ground designing the point-of-sales and shop displays in the stores where they sell – whether it be Beijing or China's prosperous northern cities.

It's where the action is going to be for the next few decades. Forecasts show the Chinese will over take the Americans as the world's biggest consumers of luxury goods by 2015, and that by 2020 the Chinese will be buying half of all luxury goods being produced. Clients also need all the local intelligence they can because the market is changing fast. For example, the Chinese government is cracking down on what the big overseas brands names are selling.

In an interesting twist, China's politicians are increasingly worried about the "hedonism" that is being displayed by the country's fabulously rich new entrepreneurs so they are demanding that global firms such as LVMH also sell cheaper lines. Hermès, for example, is starting a less expensive diffusion line under the Shanghai brand. There is also growing demand for Mr Sheridan's products from indigenous Chinese companies that are now moving up into the luxury market. "Made in China" is no longer the ubiquitous label found on cheap imported toys.

Indeed, China's fashion giant, Bosideng, opened its first West End store last week ahead of the Olympic rush of Chinese into London. Eve, a Chinese fashion label, is aiming to be China's Alexander McQueen, and has plans to open in the UK next year. As Mr Sheridan explains, these new Chinese labels have to say made in London and Bejiing to give them authenticity.

So it's a great time for him to be on his business trip – everyone is overdosing on the Olympics high, and the Chinese will by now have scooped up most of the gold medals so they should be in a good mood. Britain's creative reputation is on a high too – whether it be Thomas Heatherwick's magnificent burning cauldron for the opening ceremony or the efforts by the British Business Embassy to push the UK's creative industries, which contribute £100bn – around 8 per cent – to GDP, not far short of our financial services industry.

But here's the sting in the tail. To finance his new Shanghai office, Mr Sheridan went to NatWest, his bank of 30 years, to ask for a loan facility of £250,000 to ring-fence the Chinese enterprise, but hopes not to use the facility. He offered adequate personal guarantees and sought the Government's Enterprise Fund Guarantee to support the loan. You've guessed. NatWest – part of the state-backed Royal Bank of Scotland – refused the request, claiming the guarantees are not enough and the EFG does not cover overseas expansion.

His Leicestershire bank manager said he was going away on holiday, and suggested that if he wants to appeal against the decision, he should phone the NatWest business hotline.

Instead of getting mad, Mr Sheridan got even. He put in the same request to Clydesdale – owned by National Australia Bank – which has agreed the facility and offered better terms for his main business as well. So now he and his wife Julien, who is chief executive, have closed the NatWest account.

What bugs him most is that as one of the country's 4.7 million SMEs, he is doing what everyone, from Government down, tells him to do – stop being parochial and expand overseas. Remember that CBI speech from William Hague a few months ago that urged business to get out and sell?

Well, most of them have. Mr Sheridan reckons this recession has changed thinking irrevocably; every small businessman or woman he knows is trying every trick in the book to win business. Here's a sweet irony: he is also working with Quintessentially British, a new touring exhibition being organised by the concierge-to-events group to showcase the best of British design, culture, fashion and luxury brands in Brazil, Russia, India and China. Starting in Moscow next March, it is being backed with huge pomp by the Prime Minister's office, the UK Trade & Investment, the Foreign Office, the British Council and Bafta to name a few.

Mr Sheridan is helping design the exhibitions and create the pop-up shops, which will be left behind after the tour for a British Eccentrics exhibition aimed at pushing exports by British SMEs such as Jade Jagger and Jo Malone. It's great the Government is leading the charge to help SMEs expand but if the finance – particularly for exporting abroad – is not in place to support them, there's a danger that all these efforts are a busted flush.

Mr Sheridan blames the banks for putting the brakes on SME expansion, claiming they are slow and Dickensian in approach, often taking the wrong measure of risk, particularly for smaller companies such as his.

"I don't want to touch the bank's money, because we hope we can finance this out of working capital, but we do need the facility," he says. "If companies like mine find it difficult to finance expansion into countries such as China, where we know big growth is coming from, how are we going to compete as a nation?"

It's a view echoed by Sir Martin Sorrell, the chief executive of marketing agency WPP. He warned at one of the British Embassy conferences on the creative services last week that London's creative industries can't afford to be arrogant or complacent as the Chinese will soon be producing their own ad agencies, perhaps even better than ours, and won't need UK expertise.

The Olympics have again reminded us of the brilliance of British design and technology, from Brunel to Heatherwick. It's for the banks now to take a more daring approach to risk, to start learning how measure risk on trade and adventure.

If we are not careful, the Chinese will see a missed opportunity and start exporting their banks, as well as their new luxury shops, over here.

News
peopleTop Gear presenter and all-round controversialist is at it again
Life & Style
techHow a 'grey brick' took over the world of portable gaming
Sport
Aaron Ramsey celebrates after opening the scoring in Arsenal's win over Hull `
sport
News
peopleActress speaks out against historic sexual assault claims, saying things have 'gone quite far now'

VIDEO
News
Coren Mitchell, who is the daughter of the late broadcaster Alan Coren and is married to comedian David Mitchell, produced a hand to make poker history at the 98th EPT main event.
peopleJournalist and TV presenter becomes first ever two-time winner of the European Poker Tour
Arts & Entertainment
A stranger calls: Martin Freeman in ‘Fargo’
tvReview: New 10-part series brims with characters and stories

Life & Style
Guests enjoy food and cocktail parings by Chefs Jimmy Bannos, Jimmy Bannos Jr, Daniel Rose and Mindy Segal with mixologists Josh King and Alex Gara at Bounty & Barrel: A Jack Daniel's Single Barrel Dinner Series at Heaven on Seven on April 9, 2014 in Chicago, Illinois.
food + drinkSprinkle Palcohol 'on almost any dish' for 'an extra kick' firm says...
Arts & Entertainment
Shaun Evans as Endeavour interviews a prisoner as he tries to get to the bottom of a police cover up
tvReview: Second series comes to close with startling tale of police corruption and child abuse
Arts & Entertainment
Schwarzenegger winning Mr. Universe 1969
arts + entsCan you guess the celebrity from these British Pathe News clips?
News
politicsLabour launches the 'completely hollow' Easter Clegg
Sport
Luis Suarez celebrates after scoring in Liverpool's 3-2 win over Norwich
sport Another hurdle is out of the way for Brendan Rodgers' side
News
Portrait of Queen Elizabeth-II by David Bailey which has been released to mark her 88th birthday
peoplePortrait released to mark monarch's 88th birthday
Arts & Entertainment
The star of the sitcom ‘Miranda’ is hugely popular with mainstream audiences
TVMiranda Hart lined up for ‘Generation Game’ revival
Life & Style
The writer, Gerda Saunders, with her mother, who also suffered with dementia before her death
healthGerda Saunders on the most formidable effect of her dementia
Arts & Entertainment
Last, but by no means least, is Tommy Cooper and the fez. This style of hat became a permanent trademark of his act.
comedyNot Like That, Like This centres on alleged domestic abuse
Have you tried new the Independent Digital Edition iPad app?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Database Team Lead ( Leadership, Sybase, Computer Science)

Negotiable: Harrington Starr: Database Team Lead ( Leadership, Sybase, Compute...

C#.NET Delphi SQL Developer (C#,DELPHI,SQL)

£40000 - £50000 per annum + Bonus+Benefits+Package: Harrington Starr: C#.NET D...

VB.NET SQL Junior-Mid Level Developer (VB.NET,SQL,Excellent com

£25000 - £35000 per annum + Bonus+Benefits+Package: Harrington Starr: VB.NET S...

Trade Support, Application Support, Operations Analyst, CRM MS

£45000 - £55000 per annum + Bonus and Benefits: Harrington Starr: Trade Suppor...

Day In a Page

Rubin ‘Hurricane’ Carter: The man who could have been champion of the world - and the Bob Dylan song that immortalised him

The man who could have been champion of the world

Rubin ‘Hurricane’ Carter and the Bob Dylan song that immortalised him
Didn’t she do well?

Didn’t she do well?

Miranda Hart lined up for ‘Generation Game’ revival
The Middle East we must confront in the future will be a Mafiastan ruled by money

The Middle East we must confront in the future will be a Mafiastan ruled by money

In Iraq, mafiosi already run almost the entire oil output of the south of the country
Before they were famous

Before they were famous

Can you guess the celebrity from these British Pathe News clips?
Martin Freeman’s casting in Fargo is genius

Martin Freeman’s casting in Fargo is a stroke of genius

Series is brimming with characters and stories all its own
How I brokered a peace deal with Robert Mugabe: Roy Agyemang reveals the delicate diplomacy needed to get Zimbabwe’s President to sit down with the BBC

How I brokered a peace deal with Robert Mugabe

Roy Agyemang reveals the delicate diplomacy needed to get Zimbabwe’s President to sit down with the BBC
Video of British Muslims dancing to Pharrell Williams's hit Happy attacked as 'sinful'

British Muslims's Happy video attacked as 'sinful'

The four-minute clip by Honesty Policy has had more than 300,000 hits on YouTube
Church of England-raised Michael Williams describes the unexpected joys in learning about his family's Jewish faith

Michael Williams: Do as I do, not as I pray

Church of England-raised Williams describes the unexpected joys in learning about his family's Jewish faith
A History of the First World War in 100 moments: A visit to the Front Line by the Prime Minister's wife

A History of the First World War in 100 moments

A visit to the Front Line by the Prime Minister's wife
Comedian Jenny Collier: 'Sexism I experienced on stand-up circuit should be extinct'

Jenny Collier: 'Sexism on stand-up circuit should be extinct'

The comedian's appearance at a show on the eve of International Women's Day was cancelled because they had "too many women" on the bill
Cannes Film Festival: Ken Loach and Mike Leigh to fight it out for the Palme d'Or

Cannes Film Festival

Ken Loach and Mike Leigh to fight it out for the Palme d'Or
The concept album makes surprise top ten return with neolithic opus from Jethro Tull's Ian Anderson

The concept album makes surprise top ten return

Neolithic opus from Jethro Tull's Ian Anderson is unexpected success
Lichen is the surprise new ingredient on fine-dining menus, thanks to our love of Scandinavian and Indian cuisines

Lichen is surprise new ingredient on fine-dining menus

Emily Jupp discovers how it can give a unique, smoky flavour to our cooking
10 best baking books

10 best baking books

Planning a spot of baking this bank holiday weekend? From old favourites to new releases, here’s ten cookbooks for you
Jury still out on Manchester City boss Manuel Pellegrini

Jury still out on Pellegrini

Draw with Sunderland raises questions over Manchester City manager's ability to motivate and unify his players