The business bank is being set up to address the long term problems affecting the provision of finance to small and medium sized enterprises (SMEs).
Business Secretary Vince Cable said: “Small and medium sized business are the lifeblood of the British economy but they are currently struggling to accrue the long term capital they need to grow. This is an important gap in their growth cycle which the business bank will plug by offering new sources of finance.
“To help deliver this, the Government will be advised by a talented panel of experts, led by Sir Peter Burt. It is important we get the development of the bank right. This is a long term, durable institution, not a quick-fix gimmick, and I’m confident that we are on track to deliver this help.”
Sir Peter Burt, Chair of the business bank advisory group, said: “There has been a significant long-standing gap in SME finance, so it is welcome news that the Government is taking action to tackle this problem and help provide long term finance solutions for SMEs.
“I’m delighted to have been asked to help the Government in their work to create this institution and recognise the potential this institution has in changing the finance landscape. I look forward to working with the advisory group and putting our collective experience to good use.”
The future institution will support the development of a greater diversity of non-bank business finance sources and tackle other long-standing market gaps by deploying £1 billion of new funding. The impact and reach of this funding will be maximised by exploring joint investment opportunities with the private sector and the use of Government guarantees.
As was confirmed at the Autumn Statement, we propose to use £300 million of the new funding by investing alongside the private sector in sources of finance that will help diversify the business finance market. Further detail on how this funding will be made available will be provided at Budget 2013.
The Government’s own business finance schemes will be brought together within the new institution so that they are managed as a single portfolio. It will also seek to bring Government-backed business advice services closer together, harmonise their engagement with customers and co-ordinate them closely with finance interventions, to improve accessibility for SMEs.
It is expected the institution will operate on a commercial basis within a strategic framework set by ministers. Discussions will begin in January with the European Commission to ensure the proposals for the creation of the bank and the support Government would like the institution to offer are in line with state aid rules.
Keith Morgan has also been appointed to aid the Government in setting up the business bank. Starting in the new year, he will lead the team in Whitehall that will develop proposals for the design of the future bank.