The economic situation in the West continues to make for depressing reading. The credit ratings industry has affirmed France's AAA credit rating but changed its outlook to 'negative'. It is highly likely that France will be downgraded in the next 12 to 18 months, joining six other EU countries: Cyprus; Spain; Italy; Ireland; Belgium and Slovenia.

Ireland looks to be in particularly dire trouble as its economy continues to shrink. Ireland's Central Statistics Office published figures in December that showed the Irish economy shrank in the third quarter by 1.9 percent, compared to a reduction of 1.4 percent in the second quarter.

However, the Confederation of British Industry believes that small and medium sized businesses are the key to the UK's economic fortunes, highlighting the fact that SMEs that have a turnover of between £10 million and £100 million generate 22 percent of economic revenue and 16 percent of jobs. Furthermore, the CBI report 'Future Champions: Unlocking growth in the UK's medium sized businesses' goes on to say that medium sized businesses have the ability to add £50 billion to the British economy as they continue to grow and flourish.

This belief builds on the 2010 report by the British Bankers Association, which put together a task force led by Barclay's chief executive, John Varley, to detail how banks could support businesses and specifically help SMEs to grow. Varley acknowledged at the time, 'SMEs are particularly important as a source of job creation and growth.'

The report issued three main areas of recommendations for the banking industry to adopt in order to 'help businesses thrive and grow'. The first area is to improve customer relationships, secondly to ensure better access to finance and finally to promote better information and promote understanding.

A year on from the BBA task force report and in conjunction with professional accountancy body ACCA, the BBA published the first set of data from the 'SME finance monitor' - the most detailed and regular survey of SME finance in the UK. The figures from the last quarter published in November make for interesting reading. The majority of businesses looking for either a loan or an overdraft had their applications approved. Only 2 percent of SMEs were turned down for an overdraft and even fewer, around 1% were turned down for a loan.

On first glance, this looks like a very positive picture, with businesses having no problems in accessing the necessary finance needed to grow and develop. However, on closer reading, the number of SMEs applying for finance is actually falling dramatically, as businesses are increasingly likely to live within their means and not renew existing overdraft facilities. The chief executive of the BBA, Angela Knight, explains why she thinks this is happening: 'Unsurprisingly, although banks were able to help most applicants, smaller, higher risk new businesses with no successful track record of borrowing found it more difficult to raise cash. ... Many do not have adequate business skills, plans or accounts.'

The BBA monitor supported this by finding that only 41 percent of SMEs produce management accounts on a regular basis and fewer than 22 percent of SMEs have someone in charge of finances with trained financial skills. This lack on financial planning or coherent accounts can lead to difficulties in producing business plans and subsequently getting finance.

Knight goes on to say that the BBA is targeting SMEs by promoting the task force initiatives such as business mentoring and having access to skills and training such as learning through AAT, ACCA or CIMA courses. All can be studied to a variety of levels and flexibly studied. By improving the way that SMEs manage and record their finances, the more confident banks will feel more comfortable in releasing finance to help them grow and develop.

Barclays