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UK to set up state-backed bank with US$1.6b to help small firms
Source: Agencies |
September 25, 2012, Tuesday
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BRITAIN said yesterday it would allocate 1 billion pounds (US$1.6 billion) toward a new state-backed business bank designed to expand lending to smaller firms currently starved of loans from the country's main lenders.
The government hopes its backing will be matched by a similar amount from private capital and could support up to 10 billion pounds of new and additional lending, Business Secretary Vince Cable said.
The as-yet-unnamed institution would operate through the wholesale market and would support the supply of loans and long-term capital to smaller firms through existing banks and other financial providers.
"We need a new British business bank with a clean balance sheet and an ability to expand lending rapidly to the manufacturers, exporters and high-growth companies that power our economy," Cable told a Liberal Democrat party conference in Brighton.
Cable has repeatedly complained that small and growing companies are unable to obtain the loans they need on reasonable terms, hindering a business-led recovery.
Vicky Redwood, chief UK economist at Capital Economics, said the new bank could help small firms and the wider economy but would take time to have any effect.
"It is not going to get off the ground immediately. It is something that might help more in the medium term than the short term," she said.
"There has been concern for some time that small businesses in the UK are particularly dependent on bank finance to a greater extent than in other countries and that it would be good to develop some other forms of finance for small firms. There is a problem there, and this should help to solve it," Redwood added.
"But I don't think it would do a lot to improve the overall economy's prospects in the next 12 months."
The scheme adds to other moves by the government and Bank of England to revive a stagnant economy still hit by the effects of the 2007-2009 financial crisis.
Aides said the scale of the government's commitment was significant and that the new bank could be operating within 12 to 18 months.
The government hopes its backing will be matched by a similar amount from private capital and could support up to 10 billion pounds of new and additional lending, Business Secretary Vince Cable said.
The as-yet-unnamed institution would operate through the wholesale market and would support the supply of loans and long-term capital to smaller firms through existing banks and other financial providers.
"We need a new British business bank with a clean balance sheet and an ability to expand lending rapidly to the manufacturers, exporters and high-growth companies that power our economy," Cable told a Liberal Democrat party conference in Brighton.
Cable has repeatedly complained that small and growing companies are unable to obtain the loans they need on reasonable terms, hindering a business-led recovery.
Vicky Redwood, chief UK economist at Capital Economics, said the new bank could help small firms and the wider economy but would take time to have any effect.
"It is not going to get off the ground immediately. It is something that might help more in the medium term than the short term," she said.
"There has been concern for some time that small businesses in the UK are particularly dependent on bank finance to a greater extent than in other countries and that it would be good to develop some other forms of finance for small firms. There is a problem there, and this should help to solve it," Redwood added.
"But I don't think it would do a lot to improve the overall economy's prospects in the next 12 months."
The scheme adds to other moves by the government and Bank of England to revive a stagnant economy still hit by the effects of the 2007-2009 financial crisis.
Aides said the scale of the government's commitment was significant and that the new bank could be operating within 12 to 18 months.
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