Proposals to
widen business access to new and alternative sources of finance
have been published today by the independent Taskforce on non-bank
lending.
The Taskforce, chaired by Tim Breedon, CEO of Legal &
General plc, was commissioned by the Government to examine a range
of alternative and sustainable finance sources, particularly for
small and medium-sized enterprises (SMEs).
Bank lending is by far the largest source of external finance
currently used by businesses, but the Taskforce believes there is
significant potential to develop both the demand and supply of
non-bank lending to match the financial landscape of countries
like the US.
The main recommendations from the Taskforce’s report to Business
Secretary Vince Cable are:
Increase awareness of alternative financing by creating a single
brand and a single business support agency to deliver the
Government's range of SME finance programmes, drawing on
international examples such as Germany's KfW. Industry to
establish a Business Finance Advice network, comprising the main
accountancy bodies. Open up access to capital markets financing
for smaller companies through the creation of a body to bundle and
securitise SME loans. Consider the potential for the
Government's Business Finance Partnership to invest in
innovative products such as mezzanine loan funds and peer to peer
lending.Encourage large businesses to support smaller companies by
reinforcing prompt payment practices, supporting greater use of
invoice discounting and utilising supply chain financing to invest
in smaller suppliers.Government and industry to review the impact
of international prudential regulation such as bank and insurance
capital rules on the supply of SME finance.Increase the UK retail
investor appetite for corporate bonds.
Business Secretary Vince Cable said:
“We need to reshape the UK’s finance landscape to better serve
the needs of ordinary businesses, helping more companies find the
support they need to start and grow.
“Tim Breedon’s Taskforce has brought together industry, investors
and advisers to provide evidence and ideas on increasing the range
of finance sources available to small businesses. I thank them for
their hard work and detailed recommendations, and I hope this will
represent a turning point in business finance in this country.”
Tim Breedon, Chairman of the non-bank lending Taskforce, said:
“There is compelling evidence that access to finance is expected
to become more acute as business confidence and growth returns,
whilst continuing bank deleveraging is likely to leave a
significant funding shortfall.
“Whilst there is no silver bullet to addressing this issue, we
have made a number of recommendations which I believe will
collectively help open up alternative financing channels for UK SMEs.”
John Walker, National Chairman, Federation of Small Businesses,
said:
“We very much welcome this report as the recommendations chime
closely with changes the FSB has called for to open up finance for
small businesses. Bold action needs to be taken to ensure a
behavioural shift so that small firms know what alternatives to
bank finance are available.
“Putting the Government’s financial products under one umbrella
organisation and looking at a pilot SME bond scheme, as well as
learning what works well in other countries is a good step forward
and we urge the Government to take forward the recommendations as
soon as possible.”
The report anticipates growth in demand for finance as the
economy recovers, and the expected constraint on availability from
banks as they deleverage could create a finance gap for businesses
of £84 billion to £191 billion over the next five years.
The Taskforce’s recommendations on increasing the supply and
take-up of alternative sources of finance are aimed at closing
this gap.
The Government will now review the recommendations presented by
the Taskforce and announce its response shortly.
Notes to editors:
The full report can be accessed at
http://www.bis.gov.uk/businessfinance from 10am today.
The non-bank lending Taskforce comprised the following members:
Chairman: Tim Breedon, CEO L&G
Panel members: Xavier Rolet, LSE
Dame Helen Alexander,
CBI
James Douglas, ACT and Deloitte
Charles Roxburgh,
McKinsey
Chris Rowlands, Rowlands Review and Finance
Wales
Brian Robertson, HSBC
Julian Franks, London Business School
The Government announced in the 2011 Autumn Statement that it
would commission a review of non-bank lending to report to the
Business Secretary ahead of the 2012 Budget.
This year the Government is running the Business in You campaign
to encourage more people to start or grow their business
throughout 2012. More information is available at
businessinyou.bis.gov.uk.
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