APA supports Cable

Business Secretary Vince Cable has announced a new business bank as part of the coalition's latest plank of its industrial strategy but APA feels it is another desperate attempt to bypass the broken British banking system which it believes remains one of the major obstacles to economic recovery.

The plan is meant to result in a surge of new loans to small businesses; yet net lending continued to fall, and it remains the lender of last resort just like the long standing Loan Guarantee Scheme – which has failed miserably. Past experience suggests the new institution will be hemmed in by tight financial restrictions imposed by a nervous Treasury and many believe government should definitely not get involved in banking at all. But Cable and his Ministerial team recognise something must be done to stimulate growth in the financial sector and APA applauds its commitment to be brave..

A new report by the Institute of Public Policy Research (IPPR) suggests that £40bn would be the minimum size worth bothering with if the new bank is to make a serious difference to the economy, and urges the Treasury to allow it to raise funds on capital markets to boost its lending power to £100bn.

APA’s Gareth Osborne sees the new bank as a positive solution to some of Britain's long-term economic problems but not a rapid cure for the immediate slump. “It could help to boost investment levels which remain far too low in the UK; when compared to international rivals. And a state-backed bank could take a more long-sighted approach than small firms are accustomed to seeing from risk-averse high street lenders, with their uncompromising computerised loan models and centralised decision making and poor local management.”

So Mr. Cable is to be encouraged for floating the idea, and we wish him luck as he tries to persuade the Treasury to be bold; but it also serves to underline the unfortunate truth that Britain's banking system is failing and it must be brought into line if real growth is to return.

APA