Member Article

Shop around for finance, civil servant tells SMEs

A senior civil servant outlined progress made in readying the Government’s ‘Business Bank’ which is due to launch this Autumn.

The Department for Business, Innovation and Skills’ Andrew van de Lem is part of the team setting up the Bank and told businesses that it will work hard to redress long term structural problems business finance markets.

Addressing businesses at the Tees Valley Business Summit this week, Mr van de Lem said the purpose of the Bank was to create additional lending and not to replace existing schemes.

He suggested SMEs should “shop around” for finance and be prepared to switch bank as this would encourage more competition in the sector.

Speaking to Bdaily, Mr van de Lem said: “The Business Bank will try to solve some of the problems in the business finance market. It will have a balance sheet of between £3-£4bn and, at least to start off, will be putting money into funds and through banks.

“It won’t be lending direct and so you won’t see a business bank on every street corner, but hopefully most banks will offer some of its products.

“We’ve started preparations for the bank - for instance we’ve got an investment programme that will put £300m to work - and hopefully in the Autumn we will be able to launch and we’ll see how those funds get through to businesses.”

Plans for the Business Bank were announced in September last year as the Business Secretary Vince Cable said it would operate through wholesale markets with a commercial focus, “at arms length” from Government.

The idea followed a report from now ex Legal & General boss, Tim Breedon, that suggested a funding gap of between £84-£191bn could occur over the next five years.

So far Britain is one of few developed economies without such an institution.

Mr van de Lem added: “We have good links with the banks and have already established lots of interventions. Many programmes already run through the banks and they’re an important part of the access to finance community.

“We know bank behaviour is changing - partly because of regulatory rules. But, we’re also encouraging ‘challenger banks’ and other non-traditional forms of finance - places like funding circle for example.

“Some places are doing things differently, and we want to catalyse that market, to make a change.”

Following extensive regulatory approval the Business Bank aims to launch in Autumn 2013.

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