EXPERIENCE suggests that, during every autumn party conference season, the Government likes to pull a few policy rabbits out of hats to make the faithful feel especially good about themselves, and the Conservatives have stayed true to this trend at their recent Manchester gathering.

Chief amongst said rabbits, and of particular interest to the North East business community, was Chancellor George Osborne’s decision to announce a new way of improving the availability of capital to small and medium-sized businesses.

The multi-billion pound ‘credit easing’ programme will see the Treasury buying companies’ corporate bonds in order to provide capital directly to businesses that have been unable to secure much or indeed any from the banks.

The credit will be provided through an arm's-length operation direct to companies, with the Bank of England acting as the Treasury's agent and thus further enhancing the reliability of the monies.

Further details of exactly how this will work are a little sketchy at the moment, to say the least, but in the current climate, anything that improves the flow of capital to Britain’s businesses must at least be given a chance to show what it can achieve.

However, it does rather put the success or otherwise over the last ten months of ‘Project Merlin’ into rather stark relief. This was the initiative announced in February that, in the words of Mr Osborne himself, secured a “massive 15% increase” in lending by the big five banks to business customers, thus freeing up the flow of credit into the economy.

While we are told that the banks have met their initial six-month lending target, would the Government be announcing this new initiative if it believed that this was doing the trick, or is it, as the banks are saying, that small businesses do not want to borrow?

With so much bad economic news around at the moment, these firms could be forgiven if this was the case.

However, businesses in the North East are in an advantageous position in one respect, in as much as they have access to the £125m Finance For Business North East Fund, which has in practice, rather than in theory, made significant amounts of investment capital available .

Without the “bells and whistles” required by the banks, this source of unsecured capital gives businesses a major opportunity.

Firms with strong track records, healthy order books and robust business plans can access this readily available funding.

We’ve been told all along that the economic recovery has to be led by the private sector – let’s hope that credit easing turns out to be a solid step in this direction, rather than just an easy win in a conference speech.

For more information about NEL’s investment criteria, visit www.nel.co.uk  or contact the investment team on 0845 111 1850.

:: Barrie Hensby is chief executive of NEL Fund Managers