In looking to solve the country’s business lending issues, the government’s new plan of action is to create a state-backed bank to deal solely with lending to small and medium businesses. This is the pet idea of business secretary Vince Cable, and though there are few details yet emerging about the project as a whole, it’s still interesting to gauge the reaction of the business community.
The Federation of Small Businesses welcomes the initiative, which should work alongside the Bank of England’s Funding for Lending scheme. Mike Cherry, national policy chairman, said: “It is something we welcome being looked at. At long last the government is beginning to listen to some of our ideas about getting more finance to the small businesses that need it because the current method isn’t working.”
The British Chambers of Commerce has long been lobbying for such a system to be set up, and so reviews from their camp are pretty positive. Dr Adam Marshall, policy director at the BCC, said: “For the next 50 years it could be making an impact on British businesses’ growth prospects. A business bank would lend, at a fair risk premium, to some of these new and growing businesses.”
The British Venture Capital Association believes there needs to be more clarification of what the government wants to achieve; “As a simple matter of fact it can work, but it is not obvious what route the government as a whole is going to take. It depends so much on what the government intends. Is this a temporary fill-in for a remediable situation for banks and small businesses, or are we taking a more profound view that unless you have a big state investment bank, you will always be missing something from the equation?”
Whatever tact the government is thinking of taking, it will be interesting to see whether this latest project has any impact on the small business lending environment.