BUSINESS Secretary Vince Cable yesterday promised the coalition’s new £1 billion Business Bank would “significantly improve” competition in lending available to firms as he confirmed that retired Scottish banker Sir Peter Burt will head its advisory board.
The former deputy chairman of HBOS will chair the group working to set up the bank, a key Lib-Dem initiative, which was unveiled by Chancellor George Osborne in the Autumn Statement.
The Business Secretary confirmed Burt’s appointment in a written statement to parliament in which he outlined action already being taken to improve the flow of credit to smaller firms. These include the Funding for Lending Scheme and the Business Finance Partnership.
But he said many small firms “still struggle to raise finance from their banks.
“Furthermore, well before the financial crisis Britain suffered from structural failings in finance, in long-term credit in particular. Now, as the economy recovers, there is a risk that UK businesses lack the support they need to grow.”
The new bank will operate on a commercial basis and will aim to fill gaps in the business finance market, he said. Analysts expect it to leverage up to £10bn from joint investments with the private sector, and to make use of government guarantees. It will also draw together existing schemes to manage them as a single portfolio and ensure businesses are aware of the range of advice available.
In Commons exchanges during questions from MPs, Cable said: “This British Business Bank will significantly improve the level of competition and variety of finance available to British businesses, especially small and medium-sized enterprises.”
Shadow business minister Toby Perkins said: “The small Business Bank provides the last chance for this government to take meaningful action that could see the vital flow of cash to Britain’s small businesses.”
Cable replied: “There’s no complacency, we recognise there is a very serious problem which results ultimately from the collapse of the banks in 2008-9. It’s had devastating long-term consequences.
“We’re seeking to address that with a variety of interventions. I think there are positive things, including the emergence of challenger banks.
“When the advisory group meets early in the new year, we will be setting out a detailed plan of action including dates and objectives.”
Further members of the advisory group chaired by Burt will be announced shortly, Cable said.
Matthew Fell, CBI director for competitive markets, said: “The CBI welcomes the appointment of Sir Peter Burt to chair the advisory group for the government’s Business Bank.
“Sir Peter’s first challenge for 2013 will be to ensure the Business Bank has clear objectives to help small and medium businesses grow, like bringing all existing government financial support under one roof. We look forward to working with him and colleagues to make that happen.”