British Business Bank Gets a Billion
At the Lib-Dem Conference in Brighton today, Business Secretary Vince Cable announced the securing of £1 billion of taxpayers money toward the new Government-backed Business Bank.
The Business Bank, news of which has been brewing for a while, will not actually be a bank as such but is expected to run via existing local providers with the Co-operative Bank and UK branches of the Swedish bank Handelsbanken being mentioned so far.
The Treasury has given its backing to the new business bank and the new institution, to operate at "arms length" from the Government, aims to have up to £10 billion available for small and medium sized businesses.
Speaking at the Conference, Cable said:
Our industrial strategy can only work if finance supports business investment and growth and currently it doesn’t.
Our leading banks are often anti-business, especially anti small business, they threw traditional relationship banking over the side and sold useless insurance and dodgy derivatives instead and public anger at the greed and stupidity in this industry will continue for a long time.
But I want to look forward and work with a new generation of sensible bankers to support the real economy.
The business secretary went on to speak about splitting the investment banking arms of the high street financial institutions, as detailed in the Vickers report, then mentioned the new business bank;
This is no time for the state to be stepping back.
We need a new British Business Bank with a clean balance sheet and an ability to expand lending rapidly to the manufacturers, the exporters, the high growth companies that power our economy. and I can announce to you today that we have one.
I’m working with the chancellor to develop a new institution that will combine a billion pounds of new Government capital with a larger private sector contribution, and this will apply leverage through guarantees to support up to £10 billion of finance to small and midsize companies.
This is a significant proportion of all the lending currently available.
In an official press release, the Department of Business, Innovation and Skills (BIS) noted that the new business bank would operate "through wholesale markets" and have no retail presence. It added that the new institution would neither replace nor subsidise existing banks and would work to encourage financial growth with the private sector rather than against it.
Further details of Britain’s new commercial investment institution are expected to be announced later in the Autumn. A report on BBC Radio 4 quoted the date as the 5th of December but also said that small businesses might not see any lending from their new business bank for at least another 18 months beyond that.
In the meantime the Funding for Lending scheme is active, encouraging banks to lend to small firms at lower rates of interest, but SMEs might like to look at our business advice article on alternative sources of business funding.