Government-backed Business Bank On the Cards

Just over a week ago, the Chancellor of the Exchequer, George Osborne, told the BBC’s Andrew Marr Show of plans for a "small business bank".

The state-backed bank however will not actually be a bank in the traditional sense and is not expected to compete directly with existing institutions. Osborne said it would be a vehicle to deliver "all the alphabet soup of existing schemes".

In a speech on Tuesday, Business Secretary Vince Cable confirmed that the "business bank" would go ahead. Setting out his "vision for the future of British industry" Cable announced that the new institution would help businesses to invest and grow.

Details of the new bank are still vague but Cable mentioned that "challenger banks" and alternative providers could be in line for operating the scheme – The Co-operative Bank and British branches of the Swedish newcomer Handelsbanken were mentioned.

The Business Secretary stopped short of announcing new regional banks though, despite Handelsbanken and the Co-op being fairly low-key (Until The Co-operative Bank takes over 632 branches from Lloyds TSB Group). Liberal Democrats have been understood to be keen on using the nationalised RBS bank to operate any new government-backed business banking.

Critics of the "bank" moniker have pointed out that the "Business Bank" is not a bank and if it were to be so it would take longer to set up than the Coalition Government is planning: To be a bank it would require an FSA banking licence and that, could take years, something that persuaded Dave Fishwick from the Bank of Dave to set up his own savings and loans company.

Vince Cable’s speech about Britain’s future industrial strategy included mentions of "advanced manufacturing" and "knowledge-intensive services" and it is hoped that leading automotive , aerospace and creative industries will benefit and maintain their edge in the world.

But when this Government’s Project Merlin has already failed, Quantitave Easing has had little noticable impact and the Funding for Lending scheme is just the latest in a line of funding initiatives, small businesses may still be wondering if this is just the latest in a string of non-events.

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