According to a statement, the new bank will aim to attract private-sector funding so that when fully operational it could support up to £10bn of new and additional business lending.
The government says it will build a single institution designed to address long-standing structural gaps in the supply of finance, as identified in Tim Breedon’s report on non-bank finance.
It is expected to bring together in one place government finance support for SMEs and it will also control the government’s interests in a new wholesale funding mechanism, which will be developed to unlock institutional investment to benefit small businesses.
Cable said: ‘For decades, British industry has lacked the sort of diverse, long-term finance that is quite normal elsewhere.
‘We need a British business bank with a clean balance sheet and a mandate to expand lending rapidly, and we are now going to get it.
‘Alongside the private sector, the bank will get the market lending to manufacturers, exporters and growth companies that so desperately need support. It will be a lasting monument to our determination to reshape finance so it can finally serve industry the way it should. Its success will not be the scale of its own direct interventions but how far it shakes up the market in business finance and helps to ease constraints for high-growth firms.
‘Having a functioning, diverse supply of finance is an integral part of the government’s industrial strategy. It is all about making the right decisions now to secure our long-term industrial success.’
The Department for Business, Innovation and Skills (BIS) says more detail on the design of the bank and the types of interventions it will support will be provided in the autumn.
Welcoming today’s announcement, Chris White MP, co-chair of the Associate Parliamentary Manufacturing Group, said: ‘Banking reform on this scale must tackle systemic issues of competitiveness and diversity across the sector, as well as more significant cultural changes that need to take place.
‘We hope that the government is bold in its thinking about how the new bank operates, where it sits and how it relates to the existing sector.
‘We hear many stories from businesses reporting a lack of thorough knowledge about industry within regional branches of high-street banks.
‘There are banking staff making decisions about loans and overdrafts who do not adequately understand how manufacturing businesses operate, the challenges they face or why particular businesses might represent a very solid investment.
‘We hope that, whatever the final institution looks like, there is a concerted effort to change some of the cultures and practices within the sector to make sure that we not only have a new bank for industry, but a banking sector that is designed to work towards the common goal of growing UK business.’
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