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Forum of Private Business responds to announcement of new government-backed ‘business bank’

The Forum of Private Business is welcoming plans for a new government-backed ‘business bank' to boost small business lending – but, with few details about its structure and operation emerging, the Forum is requesting clarity over how the bank will deal with the central issue of lending risk assessment and affordability.

The Forum is also warning that the spotlight must remain on making the UK's high street lenders provide a better service to their commercial customers, in parallel to the new bank's activities.

"This government-backed business bank is sorely needed to boost competition in small business finance markets, but the question of how it will assess risk accurately is important given the over-centralised, tick-box mentality still displayed by many mainstream lenders, which of course must also play their part in stimulating entrepreneurship and growth," said the Forum's Chief Executive, Phil Orford.

"The lack of affordable lending for small businesses is dragging on and risks plunging the UK into a severe recession unless something is done soon to get finance to firms that need. An approach involving the new business bank, commitments from traditional lenders to improve their local services and accountability and support to allow alternative funders less reliant on automated risk systems to compete is required without delay.

"From the Enterprise Finance Guarantee to Project Merlin we have had several initiatives to improve bank lending substantially and none has succeeded, so it is important the new bank is not simply an amalgamation of these previous, failed schemes but instead provides real hope in the form of affordable credit, and stimulates private lenders to follow suit.
 
"We must not give up and allow banks to have a free rein to marginalise small businesses that need them most. "

The Forum is lobbying for better bank lending and other provisions to boost firms' finances as part of its headline Get Britain Trading campaign. For more information call the Forum of 0845 130 1722 or visit www.fpb.org/join.

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