Britain is to expand its credit-easing scheme for small businesses to include larger firms and will also give banks more options to access state-guaranteed funds to boost take-up, Chancellor George Osborne said yesterday.
The move comes as the UK government faces growing calls to stimulate Britain’s flagging economy, which is suffering its second recession in four years. Policymakers have highlighted a lack of credit as a major obstacle to recovery.
Osborne’s comments related to the National Loan Guarantee Scheme, launched in March and aimed at lowering the cost of borrowing for small businesses by giving banks a state guarantee to issue debt.
Giving his first assessment of the scheme in parliament, he said so far banks had offered 10,000 loans worth almost £1.7 billion to businesses with a turnover of up to £50 million.
He said the EU had granted approval for the scheme to be extended to include firms with an annual turnover of up to £250m – some 99 per cent of British businesses.
The Chancellor said banks had issued £2.9bn of state- guaranteed debt since its launch, slightly more than the £2.5bn envisaged for this stage of the programme.
The scheme is designed to guarantee up to £20bn of debt over two years.
But not all of Britain’s banks signed up to the scheme. HSBC argued that its funding costs were already low and said participating in the scheme was not financially viable.
Treasury officials said they were continuing conversations with the bank.
Worries about banks’ exposure to highly-indebted eurozone states have driven up the rates at which banks lend to each other, and made it costlier for institutions to raise funding on wholesale markets.
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Thursday 23 May 2013
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