New business bank to support up to 10 billion Pounds of business lending
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24 September 2012 - BIS
Business Secretary Vince
Cable will announce today (24 September) the first steps in creating a
Government-backed business bank, including new Government funding of �1
billion.
It will aim to attract
private sector funding so that when fully operational, it could support
up to �10 billion of new and additional business lending.
The Government will build a single institution that will address
long-standing, structural gaps in the supply of finance, identified in
Tim Breedon�s report on non-bank finance. It will bring together in one
place Government finance support for small and mid-sized businesses. It
will also control the Government�s interests in a new wholesale funding
mechanism which will be developed to unlock institutional investment to
benefit small businesses.
Vince Cable said:
�For decades British industry has lacked the sort of diverse, long-term
finance that is quite normal elsewhere. We need a British business bank
with a clean balance sheet and a mandate to expand lending rapidly and
we are now going to get it.
�Alongside the private sector, the bank will get the market lending to
manufacturers, exporters and growth companies that so desperately need
support. It will be a lasting monument to our determination to reshape
finance so it can finally serve industry the way it should. Its success
will not be the scale of its own direct interventions but how far it
shakes up the market in business finance and helps to ease constraints
for high-growth firms.
�Having a functioning, diverse supply of finance is an integral part of
the Government�s industrial strategy. It is all about making the right
decisions now to secure our long-term industrial success.�
The bank will operate at arms-length from Government. It will be
professionally run and commercially focused. It will facilitate the
provision of loans, including long-term capital, to UK firms through
banks and other financial institutions. By harnessing the power of
capital markets, it has the potential to transform business finance in
the UK.
The new institution will operate through the wholesale markets, it will
not have any retail presence and will not displace or subsidise banks.
Its role is to encourage the development of private sector solutions
and enable the market to work properly, not compete with it.
More detail on the design of the bank and the types of interventions it
will support will be provided in the autumn.
Notes
1. Proposals to widen business access to new and alternative
sources of finance were published by the independent taskforce on
non-bank lending in March 2012. The taskforce, chaired by Tim Breedon,
CEO of Legal & General plc, was commissioned by the Government
to examine a range of alternative and sustainable finance sources,
particularly for small and medium-sized enterprises (SMEs). The report,
Boosting finance options for business, can be
downloaded from here.
2. The Government's economic policy objective is to achieve 'strong,
sustainable and balanced growth that is more evenly shared across the
country and between industries.' It set four ambitions in the �Plan
for Growth� (PDF
1.7MB), published at Budget 2011:
� To create the most competitive tax system in the G20
� To make the UK the best place in Europe to start, finance
and grow a business
� To encourage investment and exports as a route to a more
balanced economy
� To create a more educated workforce that is the most flexible in
Europe.
Work is underway across Government to achieve these ambitions,
including progress on more than 250 measures as part of the Growth
Review. Developing an Industrial Strategy gives new impetus to this
work by providing businesses, investors and the public with more
clarity about the long-term direction in which the Government wants the
economy to travel.
About the Author
� Crown Copyright. Material taken from the BIS Department for Business, Innovation and Skills. Reproduced under the terms and conditions of the Click-Use Licence.
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Article Published/Sorted/Amended on Scopulus 2012-09-25 13:41:44 in Economic Articles
