Business Bank plans ‘need to go further’

Business groups have claimed the Government’s plans for a state bank to encourage UK enterprise do not go far enough to help small companies.

The £3.9 billion British Business Bank (BBB) proposed by the Government is intended to make it easier for SMEs to access business funding. The bank will include £1 billion of new money, along with £2.9 billion of existing capital from business finance schemes, which will all be brought together in a single initiative.

David Petrie, Head of Corporate Finance at theInstitute of Chartered Accountants in England and Wales (ICAEW) says the proposals do not appear to address the needs of businesses today and the finance gaps that currently exist.

Missed opportunity?

He says: “It is shaping up to be a missed opportunity to make a real difference, especially to micro and smaller businesses. The proposals, as announced, amount to little more than a re-spray of the Capital for Enterprise scheme, based in Sheffield.

“Past measures to improve both awareness of CFE’s funds and the number and nature of businesses it invests in have failed. Perhaps that’s because it is neither in the city nor across the regions.

“The fact that these proposals also rely on obtaining EU State Aid Approval, which is anticipated in autumn 2014, highlights how far off the Business Bank is from being open for business.”

Adam Marshall, the British Chambers of Commerce’s Director of Policy and External Affairs, says he wants the long-term vision for the bank to be much bigger.

“This has to be about a major new player that can support wholesale SME finance and work directly with businesses to plug the gaps where the private sector fears to tread,” he comments.

“It will need a massive additional injection of capital to sit alongside state institutions in our competitor countries. A minimum of £10bn of capital is needed for the Business Bank to be a game-changer.”

Plans are well advanced

However a spokesman from the Department for Business, Innovation and Skills says a lot of work has already been done on establishing the BBB.

He explains: “The Business Bank will, of course, build on the success of the existing infrastructure, such as Capital for Enterprise, but will represent a step-change in the scale of government programmes and commitment to the sector.”

The Confederation of British Industry (CBI) is in support of the scheme but has urged the Government to do all it can to make sure it secures the necessary state aid approval from the European Commission.

Hayley Conboy, CBI Head of Group for Enterprise, adds: “The Advisory Board’s recommendation that the Business Bank should rationalise Government finance schemes and act as the hub for business finance support is exactly what the CBI has been calling for.

“We want the Business Bank to scale back finance schemes that aren’t working and use the money saved to prioritise long-term patient capital for growing firms. The Government must now put all of its efforts into working with the European Commission to get state aid approval.”

Getting easier access to money may make it easier for start-ups and SMEs to fund business growth as well as staying in control of their finances and keeping on top of regular overheads such as rent for commercial premises. Bizspace has a range of guides for start-ups including how to access business funding.