Business secretary Vince Cable today announced the launch of a new ‘business bank’ at the Liberal Democrat Party’s conference.
The new scheme, first unveiled by Cable earlier this month, is to be kick-started with government funding of £1bn and is likely to launch in the next 18 months.
Cable intends for the institution to be simultaneously backed by private sector investment to a similar level and to expressly support exporters, manufacturers, start-up and growth companies, however exact details about the source of the funding will not be released until the Autumn Statement on December 5.
The new initiative, which is set to operate via existing lenders, has been developed in response to the failure of major banks to hit their lending targets in 2011, which resulted in the commission of Tim Breedon’s report into alternative financing sources.
The ‘business bank’ will operate at arm’s length to government, to provide business owners with a single wholesale institution that offers funding from alternative sources, such as peer-to-peer lending.
It is hoped that small and medium-sized businesses previously rejected by high street banks will have access to £10bn of finance under the new scheme.
However, shadow business secretary Chuka Umunna, warned against the danger of the new bank failing to branch away from previous unsuccessful schemes: "It is crucial that this business bank is more than merely a re-badging of existing schemes but that it gets credit to profitable firms that can't access it after the failure of ministers' Project Merlin and credit easing schemes to do so.”
Nonetheless, Cable remains confident that the new scheme will provide smaller and growing businesses with the longer term financial support they have so far lacked.
He said, “For decades British industry has lacked the sort of diverse, long-term finance that is quite normal elsewhere.
“We need a British business bank with a clean balance sheet and a mandate to expand lending rapidly and we are now going to get it.”