Budget must back business - not the banks
Apr 14 2009 by jez Davison, Evening Gazette
Finding a solution to the banking crisis should be the top priority in this year’s Budget, says JEZ DAVISON
A FEW months ago Peter Mandelson pledged to get tough on banks that turned off the lending tap to businesses. But the drought shows little sign of ending.
The Business Secretary’s ‘no more Mr Nice Guy’ (was he ever?) image is cutting little ice with banks and many Tees Valley firms have been unable to access vital funds to expand or ease cashflow problems.
Others have had their overdraft facilities withdrawn or loan interest rates hiked up without warning, as banks scramble to repair their battered balance sheets.
According to the Federation of Small Businesses (FSB), one third of small firms said their bank was less helpful now than before the credit crunch began – precisely at a time when help is needed most.
Next week’s Budget is the ideal opportunity for the Government to sort this problem once and for all.
Firstly, banks should be instructed to promote more vigorously the much-vaunted Enterprise Finance Guarantee scheme, under which up to £1.3bn of new loans will be guaranteed by the taxpayer. Too many businesses say their banks aren’t providing information on how to access this pot of money, rendering it largely ineffective.
Secondly, ministers should adopt an FSB proposal to introduce a Post Bank as part of the Post Office network. This vehicle would lend directly to businesses, probably at lower rates than those offered by mainstream banks. Following much consolidation in the sector, the high street is dominated by the big three and consumers would benefit from more competition. The idea of local banks run by district councils should also be considered.
This Budget needs to make a big statement to show that ministers are behind business – the lifeblood of the economy. Confidence is at an all-time low and record numbers of companies are predicted to go bust this year. Experts say that more than 35,000 firms could go under in 2009. This figure could be worse still if the Government does nothing to speed up credit flow.
The Budget provides Alistair Darling with the perfect stage to perform a rescue act and he needs a good performance. If he fluffs his lines, he might not get another chance to make amends.
What help do you want to see for business in the Budget? Tell us at nebusiness.co.uk/forum
