Wednesday, 26 September 2012

Lending to small businesses - here we go again!

Some of you may have read my earlier piece on the Government’s scheme for solving the problem of banks lending to small businesses and the way billions of pounds would be made available under a scheme to encourage bank lending to small businesses OR for mortgages.  Sorry if you thought me cynical but now I feel vindicated in saying that, at best, the money would go on mortgages.  Why?

You will have heard Vince Cable and his latest announcement on lending to small businesses to his party conference – not Parliament as I would have thought more appropriate. This got my cynic-ometer running again and made me think - oh well, the last idea didn’t work so they thought they had better announce something else!  In fact, this is the second time this ‘something else’ has been announced but I assume he thought the media might notice it this time if he announced it at a conference.

With these announcements there is usually not much detail and this is true of this one in as much as further details will be released later in the autumn.  This one was a few phrases for the party faithful to applaud and a few headlines for the media.  The reality is that the idea has not yet been submitted to the EU for its permission for us to implement our own economic policy, so that could stop it in its tracks.

Additionally, the idea will have backing of some Government money (10%) but the rest will come from private capital from investors.  I cannot make out how this will be achieved as the “bank” will not deal direct with borrowers but through normal banks – this of course means two bites of the cherry before it gets to the small business owner.

Finally, Vince Cable has got to get it past his new Conservative guard dog – Michael Fallon – and I think this will be even harder than it was with Mark Prisk!!!

The Treasury response to the report on small business finance from Tim Breedon (BOOSTING FINANCE OPTIONS FOR BUSINESS) states:

“The Government also welcomes the suggestion of a single delivery agency for Government support schemes. This provides a welcome contribution to the debate on the role of Government finance interventions in tackling market failures. The comparison with state-supported agencies in other countries shows the different models available. The Government will examine the options and will need to consider the evidence and rationale carefully, balancing any proposals for change with the need to ensure continuity for existing schemes that work well, reporting back later this year. “

This doesn’t look like that single delivery agency for small businesses so will other suggestions follow?

My view still remains that it is up to us to sort out the question of finance ourselves – the current Government cannot understand what a micro business is, let alone the problems it faces.

Posted by Advisor Keith - 26 September 2012 

1 comment:

  1. Seems like even this pessimism was not extreme enough when you look at the amount of money that has been loaned to the Banks and the amount they in turn have loaned out!

    Although you may argue that there is always a time lag when dealing with your Bank between you asking them to do something with your money and them actually doing it, this may be taking it a bit far.