By Marcus Leach
Business Secretary Vince Cable today (Wednesday) set out the next steps to diversify business finance, announcing details of an industry-led Taskforce to be led by Tim Breedon, Legal and General chief executive and current chairman of the Association of British Insurers.
Tim Breedon will be supported by a panel of experts drawn from the business and finance community, who will examine the challenges facing businesses in diversifying their finance. The focus will be on debt and credit products, looking at a range of finance choices, old and new, from corporate bonds to ‘crowd-funding’.
“Businesses across the UK are still in many cases unhappy with the way they have been treated by banks," Business Secretary Vince Cable said.
“We have secured a rise in new lending from the biggest banks this year and credit easing is designed to provide another immediate boost. But I want to see as much competition in the market as possible and for businesses to have access to a wide range of finance sources.
“There are exciting innovations emerging that provide alternatives to bank lending. Businesses are selling bonds directly to their customers, missing out the middle-men. And peer-to-peer lending has opened up opportunities for savers to invest directly in the fortunes of UK businesses. I want to investigate and dismantle any barriers to these and future innovations.
“Tim Breedon is a highly capable and well-respected figure in finance and I look forward to working with him in the coming months as he takes forward this important work.”
The Taskforce was announced as part of the credit easing package in the Autumn Statement. It will report to Government ahead of the 2012 Budget statement.
UK businesses have been heavily reliant on banks to raise finance. The majority of smaller and mid-sized businesses rely solely on bank loans to raise finance. Only around 10% of these businesses seek asset-based finance and fewer than 5% choose bond or mezzanine finance.
The Taskforce will work with businesses, lenders, investors and providers of alternative finance to examine structural and behavioural barriers to raising non-bank finance. It will set out what steps are needed to ensure businesses can access a wider range of alternative finance sources.
“We are committed to broadening the range of sources of finance for SMEs and mid-sized businesses, and I am grateful that Tim Breedon has agreed to bring his broad financial experience to this important task. The work of this group will complement the credit easing package announced in the Autumn Statement,” Mark Hoban, Financial Secretary to the Treasury commented.
Taskforce Chairman Tim Breedon said it is vital for the UK economy that the flow of credit to businesses is maintained.
“As banking reforms progress, it is vital for the UK economy that the flow of credit to businesses is maintained. Non-bank finance is likely to make an increasingly important contribution, so we need to develop alternatives that work for firms and help them deliver growth in the broader economy,” he said.
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