Your independent energy adviser
0800 051 5770

Cable Promises Small Business Lending Revolution

british energy costsThe much-vaunted proposal of Vince Cable, the Business Secretary in the coalition government to get the major banks to lend more to small business is faltering with no signs of life to suggest this is bedding in inertia.

Cable explained:

“The route of using big institutions as a lever didn’t work” and the government’s view is now “let them do what they want to do, and start something new”.

The nation’s SMEs will frankly not be in the slightest bit surprised by the failure, but Cable’s “something new” might promise a brighter lending climate in the future.

British Business Bank

Describing “a lot of frustration with the big banks”, Cable promoted the British Business Bank, a ‘banking’ organisation that for now sits within the Department for Business, Innovation and Skills (BIS) whilst it awaits EU approval so that it can be run as an arms length commercial entity.

The British Business Bank intends to provide government allocated capital to “challenger banks” and other non-traditional lending platforms to kick start small business lending patterns.

Cable said:

“The restriction on credit that followed the financial crisis is a problem that has persisted to this day. Five years after the crisis, we still have more money being taken out [of small business lending], by Royal Bank of Scotland in particular, than being put in by Lloyds, Santander and some of the new challenger banks.

“Ever since I got into government I’ve been having conversations with George Osborne about how we get small business lending going. Our initial instincts were, we have these big banks who have been rescued by the state, why on earth don’t they do it? For a variety of reasons, it never happened.

“They were left at an arms’ length basis, there was difficulty with the private majority shareholders of RBS and the Treasury didn’t want to go down that road, they were interested in preparing them for privatisation, so that route didn’t work.

“They [SMEs] have walked away from the banks. The bank gave them a bad deal, and they are doing their own thing [financing expansion from their own cash].”

The British Business Bank has taken over the varied government lending schemes including the flagship Funding for Lending scheme that has seen net lending fall by £435m Q2 2014, after a £723m fall in Q1.

Overall the bank has managed or provided £800 million of investment, which has helped more than 30,000 companies over the last financial year something Cable promised was just the start saying:

“There’s a vast amount that’s still done to be done. We’re operating at a modest scale, the next step is scaling all this up.”

Whether the British Business Bank really is the answer to the lending inertia to small business we will see in due course however few could criticise businesses for doubting a lending revolution is around the corner.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.