The UK’s Confederation of British Industry (CBI) has welcomed proposals from the government’s secretary of state for business, Dr Vince Cable, for a new state-backed business bank to be established.
The government has announced that it will allocate funding of £1bn to the as-yet-unnamed institution, which aims to provide funding to small-to-medium-sized enterprises (SMEs) experiencing difficulties from a cutback in lending by the major UK banks. Cable said that the government hopes its backing will be matched by a similar amount from private capital and could support up to £10bn of new and additional lending.
He added that the new bank 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.
The CBI’s director-general, John Cridland, commented: “By bringing together all existing support into a one- stop shop, and by increasing the supply of capital to firms that want to grow long-term, the business bank has the potential to support lending and help small and medium-sized businesses to grow.
“The bank could also play a vital role in packaging up and selling debt from medium-sized companies, allowing them to access vital finance streams. The government must now work swiftly to gets the bank up and running so that it can start helping small and medium-sized businesses as quickly as possible.”
The Federation of Small Businesses (FSB) said companies needed finance to grow but were being starved of funds. “In each quarter this year, around 40% of firms that have tried to access finance have been refused,” said FSB chairman, John Walker. Business lobby group the British Chambers of Commerce (BCC) said that the new bank would allow “new and growing companies to get access to capital in the same way that they do in Germany, South Korea, and the US”.
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