UK: Vince Cable unveils details of Government plan for ‘Business Bank’

Business Secretary Vince Cable

Business Secretary Vince Cable - Credit: PA

THE Government today gave more details of its plans to set up a business bank aimed at helping smaller firms access finance, saying the venture will manage £3.9billion of resources.

Business Secretary Vince Cable said the aim is to provide a comprehensive package of support by bringing together different schemes.

Many of the measures will require European Commission approval, but the minister set out a timetable for the rest of the year, which included trials of new finance products.

He said £300million of investment will be committed by the end of the current financial year. A new company will be set up in 2014 to house the bank’s programme and appoint a chairman and board.

Mr Cable said: “This institution will bring together £1bn of new Government capital and £2.9bn of existing capital which will work alongside private sector contributions with the potential to be enhanced by guarantees.

“Inadequate access to finance for small and medium sized enterprises is one of the biggest risks to economic recovery. We need bold action to fix what has always been a weakness of the UK economy, and since the financial crisis has become an urgent problem.

“Whilst we are making great strides to reform the banking system in the UK, more needs to be done to ensure that it sufficiently serves the manufacturers, exporters and high growth firms that drive economic growth.”

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John Walker, chairman of the Federation of Small Businesses, said: “For too long, the SME lending market has been dominated by a few big players and businesses are struggling to access finance to grow.

“Competition should come from more banks on the high street as well as alternative lending providers such as peer-to-peer lenders. As such, we are pleased that the business bank will have a clear remit around simplification and competition, along with targeting its work for micro-businesses and young firms, helping them receive long-term capital.”

Dr Adam Marshall, director of policy at the British Chambers of Commerce, said: “The BCC has been calling for a business bank since 2011, so we are pleased that progress to get it up and running is finally under way.

“Now that a firm timetable for its delivery is in place, businesses will begin to feel that the promised business bank is starting to get momentum.”

Katja Hall, the CBI’s chief policy director, said: “This should give confidence to businesses that there is now a long-term solution to plug the finance gap for patient capital in the UK.

“Businesses didn’t want a host of new finance initiatives introduced as part of the business bank but simplification of existing support.

“Bringing all government financial support and advice initiatives under one roof will improve access for smaller firms, helping them fulfil their growth potential.”

Lee Hopley, chief economist at EEF, the manufacturers’ organisation, said: “Government intervention to support lending to businesses is still a high priority for growth, so it is positive to have some detail on the new business bank. Acting as a central point to focus for all existing finance initiatives should make the whole offer to business clearer and more accessible.

“As we saw in the Budget, there are limited new resources so maximum firepower needs to be deployed to tackle the biggest obstacle holding back SMEs (small and medium sized enterprises) getting the finance they need to invest and grow.”