Vince Cable has now confirmed that the government will create a state-backed business bank that will lend £1billion of taxpayers’ money via banks and other financial institutions, writes Graham Ball, CEO of the KBSA.
Whilst the idea was welcomed when it was first proposed earlier in the year, it has received a mixed response now that more details are known. It has been criticised because it will bring together existing schemes that have been intended to boost lending and failed so far.
The director-general of the British Chambers of Commerce (BCC) has warned that if the funds are channelled via the existing structures then they will not reach those in need and that a more direct link with the customer is required.
Recent evidence certainly seems to bear this out. Project Merlin should have distributed £76 billion to smaller firms in 2011 but missed its targets by £1.1billion. The loan guarantee scheme, which offered banks up to £20billion of government security, created only £2.5billion of lower rate loans for small firms.
A cynic could say – have we not all been here several times before!! It would appear that the Coalition has had several attempts to get money into SME’s, but every initiative has been a complete failure.
Not all the details are available about how this scheme will be different and the bank will be structured. There are plans to attract private sector investment as well that could boost the amount of money up to £10billion but that remains to be seen as no private investment has yet been confirmed.
Even if the scheme is successful and does release the whole £1billion it is probably nowhere near enough. It has been estimated by the BCC that the gap between bank lending and finance could be as high as £59billion by 2016.
However the FSB has welcomed the announcement. They are hopeful that this could possibly be the first step to creating a Small Business Administration, which is something they have been lobbying for and would be welcomed by many KBB businesses.
It seems that the government is in agreement that small and growing companies are unable to obtain the loans they need on reasonable terms, hindering a business-led recovery. It would be far better if they actually produced some positive results – rather than keep promising something new.
The seriousness of the situation does mean that we really do need something that will deliver money for SME’s and not just more words from a Coalition that simply does not appear to understand what business in this country needs.
Graham Ball is the CEO of the KBSA. The Kitchen Bathroom Bedroom Specialists Association (KBSA) brings together over 300 fully accredited, UK based independent, retailers. Each KBSA member provides all the expertise required to design and install a new or updated fitted kitchen, bathroom, bedroom or home office.
For further information please visit: www.kbsa.org.uk/