The coalition will push forward with plans to build a business bank and are setting aside £1 billion of capital to initially fund the venture.
Following an announcement from business secretary Vince Cable that the government would be founding a new institution to tackle gaps in finance, chancellor George Osborne has unveiled a new business bank.
Speaking to assembled members of parliament, Osborne explained, ‘The government is creating a business bank to transform the way the government delivers support to SMEs.
‘It will deploy £1 billion of additional capital to address structural gaps in the supply of finance to SMEs and stimulate the provision of long-term capital, including by leveraging in substantial private sector finance.’
The creation of the business bank comes on the back of Tim Breedon’s report on non-bank finance which looked at alternative sources of finance for UK businesses.
Private sector funding will be sought, combined with £1 billion of government funding, so that the venture will eventually support up to £10 billion of new and additional business lending.
Under the plans unveiled during Osborne’s third Autumn Statement, the new bank will have some functions operational by spring 2013 and will be fully operational in late 2014.
Paul Aitken, CEO of borro, comments, ‘Vince Cable announced plans for a £1 billion ‘Business Bank’ earlier this year which no doubt offered some light at the end of the tunnel for SMEs finding it difficult to access credit.
‘As today’s statement shows, the bank will bring in £1 billion extra capital, to lever in private lending and to amalgamate existing initiatives for business funding. This is certainly a positive step however, we have already seen various initiatives in play, to little effect. If we are going to encourage small and medium sized businesses to grow, the Government needs to pull out all the stops.’
Gary Wilkinson, CEO at Cambridge & Counties Bank, adds, ‘While the funding for lending scheme, the new British business bank and today’s announcement of a cut in corporation tax show that the government is being proactive in the SME space, there needs to be better co-ordination of such initiatives.
‘At first sight it is difficult to see how these measures will significantly increase the availability or suitability of credit for SMEs, particularly in the near term. Further details are required about exactly how the new business bank will ‘partner’ with existing banks and other lenders.’