£22bn aid welcomed, but will it be enough?
Jan 15 2009 by Peter McCusker, The Journal
BUSINESS leaders have welcomed the promise of a fresh Government injection of cash into banks to support enterprise, but some have expressed doubt it will be enough to free company credit lines and disperse the economic gloom.
The £22bn support package, dubbed Real Help for Businesses Now, is designed to address the cash flow, credit and investment needs of small and medium businesses and was unveiled by Business Secretary Lord Mandelson.
Senior figures from two Government-backed North East business and regeneration bodies last night welcomed the cash injection.
But some entrepreneurs, economists and politicians are concerned it may not be enough to alleviate liquidity problems.
One North East chairman Margaret Fay said: “These new measures will help address the key issue of firms gaining access to the capital they need and in doing so stimulate the North East economy.”
Business Link chief executive Alastair MacColl said: “This announcement is very good news for small and medium sized businesses in North East England.
“In recent months, many well run firms have started to struggle because they have not been able to access essential working capital.”
Successful North East businessman Alistair Arkley, who sold his pub chain for £32.6m in 2007, and is now chief executive of New Century Enterprises, with interests in pubs and manufacturing, said: “These guarantees will allow bankers to take more risks, knowing the Government will pick up 50% of the bill if the company fails.
“I certainly welcome them, but I’m not sure if they are enough. At the moment, there is a shortage of money to lend and a general lack of confidence in the economy. I can see there being a need for further action in the coming months.”
Federation of Small Businesses regional chairman Colin Stratton said: “It is disappointing that it has taken the Government so long to act since we asked for such measures in October. Small business closures are running at around 85 a day, meaning over 6,000 have closed while waiting for this fund to be implemented.
“The onus is now on bank branch managers to actively promote this money to its small business customers to ensure their survival and the revival of the economy.”
Economist Peter Spencer, of the Ernst & Young Item Club, said: “This is the latest mix and match measure from the Government and will help the banks and business in the short term.
“But what we need is a ‘toxic’ bank, which will take all the bad assets off bank balance sheets and free their loan books for new lending.”
Shadow chancellor George Osborne said the Government appeared to be offering a belated version of the £50bn loans guarantee scheme floated by the Tories several weeks ago. “Let us hope that they will properly implement this Conservative policy rather than a pale imitation, or else they run the risk of repeating the mistakes of their expensive temporary VAT cut and achieving nothing,” he said.
Lord Mandelson said: “We know that some companies are struggling to secure the finance they need, not because of any failure in their business, but due to the tougher credit conditions. That is why we have designed a package of measures addressing different forms of credit and providing real help for businesses.”
GREATEST PROBLEM, GREATEST HELP
THE Real Help for Businesses package has been welcomed by John Eggington, managing director at Peterlee company Sotech.
Mr Eggington said: “It is fair to say that Sotech would not be in the position we enjoy today as a respected market leader in our field with a reputation for delivery, quality and value had it not been for the public sector support we have received over the years. As someone who has been working in this sector for over 30 years, I have been through recessions and downturns, but never seen anything like the economic circumstances we are seeing at the moment.
“However, I have also never seen so much being done by the Government and public sector to try and help businesses at this challenging time.”
