Member Article

Cable confirms business bank

Vince Cable has finalised the much talked about “business bank” as he addressed the Liberal Democrat conference in Brighton.

The Business Secretary will told Lib Dems that it will help SME manufacturers, exporters and high-growth companies.

In addition to the state-backed bank, Mr Cable set out his desire for an industrial strategy, looking at long term investment to the economy.

Details about the bank remain vague, other than an initial £1bn investment from the Government. Mr Cable will say: “ I am working with the Chancellor to develop a state-backed institution that will combine up to a billion pounds of new government capital with a larger private sector contribution.

“This will then apply further leverage through guarantees to support up to ten billion pounds of finance to SMEs and mid-sized business – a significant portion of all the lending available.

“We are so good at so many things in this country – but for too long the mirage of growth based on property speculation and financial gambling has hidden the harder virtues of making things productively. We must get behind successful British-based firms in vehicles, aerospace, life sciences and creative industries and our world-class scientists and universities.

“There are some common threads: understanding that markets fail and that governments can sensibly intervene and support enterprise; and a will to fight the British curse of short-termism – both in the corporate world and government.”

A statement from the Department for Business, Skills and Innovation, said the bank will operate at arms-length from Government, and will be professionally run and “commercially focused.”

BIS stated the bank will facilitate the provision of loans, including long-term capital, to UK firms through banks and other financial institutions.

The institution will operate through wholesale markets, and will not have a face on the high street. BIS said it will not “displace” or subsidise banks.

Speaking to BBC radio 4, John Longworth, director general of the British Chambers of Commerce said the Government was right to create such an institution.

He hoped the bank would allow UK firms to access capital in a similar way to their German, South Korean and US counterparts.

John Cridland, CBI Director-General, said: “By bringing together all existing support into a one-stop shop, and by increasing the supply of capital to firms that want to grow long-term, the business bank has the potential to support lending and help small and medium-sized businesses to grow.

“The bank could also play a vital role in packaging up and selling debt from medium-sized companies, allowing them to access vital finance streams.

“The Government must now work swiftly to gets the bank up and running so that it can start helping small and medium-sized businesses as quickly as possible.”

TUC general secretary Brendan Barber added: “Ministers claim that a £1 billion investment could support £10 billion of business lending. But with the UK trapped in double dip recession, this is nowhere near enough to deal with the scale of our economic crisis.

“If this bank is as good as ministers claim it will be, they should give it the backing it deserves and vastly increase its funds. Multiplying the government’s stake tenfold could support £100 billion of additional lending. This is the level of support businesses really need.”

Steve Radley, director of Policy at EEF, the manufacturers’ organisation, said: “Setting up a new institution that brings together the range of government schemes and provides a new stream of more affordable lending to SMEs is a step in the right direction. The government has chosen the right model in using this new institution to provide a cheaper source of wholesale funding that will support lending to business without exposing the taxpayer to the risk associated with setting up a State Bank that would lend directly to it.

“The government now needs to move quickly to map out how this will work and also develop a more competitive financial landscape where business can choose between a range of finance providers rather than relying on a small number of big banks.”

Rob Donaldson, Baker Tilly’s Head of M&A and Private Equity said: “Clearly anything that supports business is to be welcomed, however there does seem to be some degree of misunderstanding about what really makes entrepreneurs tick. What entrepreneurs really need is stability so that they can make their business plans safely in the knowledge that the environment around them - particularly the tax and regulatory environment - is not going to shift.

“So whilst this support is welcome, it is outweighed by the constant and very public debate within the coalition about taxation – in particular wealth taxes, mansion taxes, and capital gains tax, which is apparently back on the agenda despite having changed on a regular basis in recent years. These debates of course need to happen, however I think it would be helpful if they could take place in private rather than played out in the media so that businesses are not distracted by such airing of ideas.”

John Antunes, Director of SME & Channels at SAP UKI “I was pleased to hear about the new ‘business bank’ plans launched today by Vince Cable. This pot of up to £10 billion on offer to some of the country’s most promising small companies could give a much needed boost to those SMEs struggling to secure loans with high street banks. This is a particularly welcome announcement for young startups who often have to resort to injecting personal funds into their business in the face of unsuccessful loan applications.

“In terms of awareness, it is great to see that the government is publicly hailing the important role of small and medium businesses in Britain’s economic recovery. In my mind, this bold move – and substantial investment – from the government should be welcomed, and I look forward to witnessing what some of the talented businesses out there can do with this state funded initiative behind them.”

This was posted in Bdaily's Members' News section by Tom Keighley .