British business bank to boost economy
The British Chambers of Commerce (BCC) has published a paper setting out the detailed case for the establishment of a state-backed British Business Bank.
The BCC’s long-standing call for the creation of a 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, entitled 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 companies 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 companies, many of whom 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; and
– 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 BCC’s paper also notes that the state-backed bank could help companies seeking mezzanine, export or supply-chain finance support, which will be key to rebalancing the economy in the years to come.
“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," Dr Adam Marshall, Director of Policy and External Affairs at the BCC, said.
“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 taxpayer.
“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 the 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.”