Tuesday, 4 September 2012

Chamber of Commerce Proposals for A British Business Bank

5th September 2012

Chambers set out proposals for a British Business Bank

The British Chambers of Commerce (BCC) has today (Monday) published a paper setting out the detailed case for the establishment of a state-backed British Business Bank.

Chambers' long standing call for the creation of business bank received a boost yesterday when both Chancellor George Osborne and Business Secretary Vince Cable announced that their departments were considering the creation of a new bank to improve the flow of credit to small and medium sized businesses.

The new BCC paper, "The Case for a British Business Bank", says that a new state-backed business bank:

  • would be a clear first port of call for all viable businesses seeking growth finance
  • would complement, not cannibalise, existing banks and other lenders, with commercial lenders having a first right of refusal on all applications received by the business bank
  • would particularly help dynamic and fast growing businesses, many of which report difficulty accessing finance, as well as address discouraged demand among some existing bank customers
  • should have its own infrastructure to rigorously assess risk and return, rather than depend on the increasingly risk averse culture of commercial banks
  • could open its doors by the end of this Parliament, and have a positive effect  on the UK's growth prospects for decades to come.

The paper also notes that the state-backed bank could help businesses seeking mezzanine, export or supply chain finance support, which will be key to rebalancing the economy in years to come.

Commenting, Dr Adam Marshall, Director of Policy and External Affairs at the BCC says

"We have repeatedly urged ministers to take the bold step to establish a British Business Bank, which could help kick start growth and jobs in the UK for decades to come.

So we are pleased that the Chancellor and the Business Secretary, as well as the Opposition, are now examining the case for the creation of a state-backed business bank.

The BCC's proposal envisages a wholly new British Business Bank, rather than the conversion of any existing financial institution owned by the taxpayer. Banks in full or partial state ownership as a result of the financial crisis should be returned to the private sector when the investment delivers an appropriate return for the tax payer.

Our new report addresses many of the obstacles to the creation of a business bank, and shows that a new institution is both realistic and achievable. Ministers have a golden opportunity to pass enabling legislation for a business bank this autumn, and to dedicate their attention to ensuring that it is operational before the end of this Parliament. A business bank isn't the answer to economic stagnation in the short-term, and the Government must be careful to get the set up right first time.

But a business bank would be able to help prevent a repeat of the financing difficulties faced by many companies since the credit crunch. What's more, a business bank could help many new and fast growing companies become the UK's future champions."

Rob Johnston, Chief Executive of Cumbria Chamber of Commerce adds

"The Government's efforts to date to increase the flow of working capital to businesses, starting with the Enterprise Finance Guarantee and ending, most recently with the Funding for Lending scheme, all share a fatal flaw: total dependence on the existing UK banking infrastructure. For real long term impact on UK business growth we need a state-backed business bank that can take its own decisions on risk and ensure we get much needed funding through to businesses.

The situation in the UK is unique. No other country has seen bank deleveraging on the same scale. SME loan rejection rates in the UK are higher than in other European countries, and UK SMEs, unlike those in many other countries, are overwhelmingly reliant on debt when they seek external financing.

This new Business Bank can only be created in the medium to long term, so alongside this we need actions that will have an immediate effect. The existing Funding for Lending scheme is one but we also need swift implementation of an aggregation vehicle to securitise UK SME loans, which would create additional headroom for existing financial institutions to lend."
Notes to editors:
.         For more information contact Suzanne Caldwell on 0845 226 0040 or 07825 050 298.
.         Cumbria Chamber of Commerce is a not for profit company limited by guarantee, owned by its members for the benefit of members. Our aim is to help the business community throughout Cumbria to grow and prosper.
.         For more information on the Chamber and its activities see www.cumbriachamber.co.uk
.         For the full BCC paper, "The Case for a British Business Bank", see www.britishchambers.org.uk

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