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March 14, 2013 2:26 pm
Vince Cable pledged on Thursday that a state-backed business bank will start investing this year, in the face of fears that its creation is being delayed by Whitehall wrangling.
“We will be getting money out of the door in serious activities this year,” the business secretary told the annual conference of the British Chambers of Commerce.
The bank, announced in September and seeded with £1bn of state funds, is a long-term initiative to widen sources of finance for smaller companies. More details are due in the Budget on March 20 but the government is under pressure to get it working quickly with businesses complaining about the lack of credit.
The BCC wants the business bank to receive an extra £9bn: the £1bn compares with £60bn a year lent to smaller companies by other banks. But Mr Cable said: “It can operate at scale – its initial equity is £1bn but there are also very substantial guarantee powers. It will leverage in substantial sums when it gets going.”
The government wants to give the bank critical mass by pulling together different schemes to build up funds, which can then be distributed by “challenger banks” – recent entrants – and venture capital funds.
It has said £300m will be co-invested with private investors over the next two years. The bank will not have a retail presence or seek to compete with the five main banks, but aims to create more competition.
Lucy Armstrong, a member of the bank’s advisory board, said the test would be how the new institution has performed in 20 years’ time, but “we have made very clear to the civil servants that the bank has to do something now. We expect to be spending and investing some of the money in 2013.”
She added: “We have got £1bn to try to establish a wider menu of finance that will be sustainable and act as a catalyst for a changing marketplace, hopefully in perpetuity.”
William Hague, the foreign secretary, rebuffed a plea by the BCC to bring forward a referendum on EU membership to before the next general election.
John Longworth, BCC director-general, said chambers supported the prime minister’s EU strategy, but pushing a decision beyond 2015 created uncertainty.
“The prime minister should reconsider engaging in negotiations this side of the election, and bringing forward a referendum,” Mr Longworth said. But Mr Hague said the Conservatives were constrained by being in coalition with the Liberal Democrats, who oppose a referendum.
Mr Longworth said most businesses in the network wanted to remain in the European internal market, but not at any price.
“The vast majority want no further integration – with all the burdens and constraints that will bring – and almost half want a renegotiation of existing terms, with only just over a quarter being prepared to accept the status quo.
“But the status quo is not an option, in the medium to long term. The EU is moving away from us. We would, by necessity, have to renegotiate our relationship with the EU even to maintain the status quo, even if we were completely happy with what we have at present.”
Mr Longworth said Britain was running “a massive trade deficit in goods with the EU and a small trade surplus with the rest of the world, so the prime minister’s negotiating position is strong.
“Trade is rapidly shifting away from a stagnant Europe towards the rapidly growing emerging markets.’’
David Cameron is under pressure from all sides and faces a delicate balancing act in attempting to renegotiate an acceptable UK membership settlement with the EU
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