Bank of Essex launched

A PUBLICLY-funded “bank of Essex” has been launched in an ambitious bid to help struggling businesses across the county beat the recession.

James Hore

A PUBLICLY-funded “bank of Essex” has been launched in an ambitious bid to help struggling businesses across the county beat the recession.

The move has been hailed by Essex County Council bosses as “one of the most significant developments in the governance or financing of Britain for a hundred years”.

Known as “Banking on Essex”, it is the first major municipal banking scheme to be created since 1915 and will provide �30million to companies through loans and overdrafts.

Funding for the scheme has come from Essex taxpayers' money in the county council's cash reserves.

Yesterday, the council said the bank was in “direct response” to the recession and designed to support small and medium sized enterprises in the county that have struggled to get credit from high street providers.

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Businesses employing less than 250 people which have been trading for at least 12 months can apply for up to �100,000, although turnover has to be less than �25million.

Loans will be handled through a partnership with Abbey Corporate Banking which will provide the credit facilities.

A website, www.bankingonessex.com, went live yesterday .

Council leader, Lord Hanningfield, said he was proud of the initiative.

“This is one of the most fundamental changes in how either our financial or governance systems operates and represents a huge shift away from an over centralised model back to a local system responsive to the needs of local businesses and their communities.

“The bedrock of the Essex economy, like much of the UK, is made up of small businesses that have been struggling in recent months to secure funding through normal lenders.”

He added: “This scheme will fill that gap directly benefiting those companies and providing them with much needed support during the downturn.

“From one of the most centralised models in world, in Essex at least, we are willing to do things differently if it benefits our local communities. I am of course proud that the county is once again leading the way.”

The scheme, which offers secured loans at 3% interest above Bank of England base rates, and 5% above for unsecured, has been backed by Essex Federation of Small Business.

Its chairman, Iain Wicks, said: “Essex County Council is demonstrating the entrepreneurial spirit which is the hallmark of so many of the county's businesses and we expect the Bank of Essex to provide support to those firms needing short term financial support which cannot be obtained from their own bank even though the business itself is viable and has a good future.

However, Tom Smith-Hughes, leader of the Liberal Democrats at County Hall, questioned whether it was the right move.

“We understand that there are issues facing small businesses accessing funds but this is not an insignificant amount of money - it is some �90 per taxpayer and it is their money that is being put at risk,” he said.

“Banking is a complex and risky business and if the banks will not risk these loans, why is the council going to?

“What the people of Essex want the county council to do is improve the services they offer - get those up to an 'excellent' level and then think about doing things like this.

“Money for this is coming from the reserves and to say it is not risky is ludicrous.”

james.hore@eadt.co.uk