The business bank is being set up to address the long term problems affecting the provision of finance to small and medium sized enterprises (SMEs).
Business Secretary Vince Cable said:
“Small and medium sized business are the lifeblood of the British economy but they are currently struggling to accrue the long term capital they need to grow. This is an important gap in their growth cycle which the business bank will plug by offering new sources of finance.
“To help deliver this, the Government will be advised by a talented panel of experts, led by Sir Peter Burt. It is important we get the development of the bank right. This is a long term, durable institution, not a quick-fix gimmick, and I’m confident that we are on track to deliver this help.”
Sir Peter Burt, Chair of the business bank advisory group, said:
"There has been a significant long-standing gap in SME finance, so it is welcome news that the Government is taking action to tackle this problem and help provide long term finance solutions for SMEs.
“I’m delighted to have been asked to help the Government in their work to create this institution and recognise the potential this institution has in changing the finance landscape. I look forward to working with the advisory group and putting our collective experience to good use.”
The future institution will support the development of a greater diversity of non-bank business finance sources and tackle other long-standing market gaps by deploying £1 billion of new funding. The impact and reach of this funding will be maximised by exploring joint investment opportunities with the private sector and the use of Government guarantees.
As was confirmed at the Autumn Statement, we propose to use £300 million of the new funding by investing alongside the private sector in sources of finance that will help diversify the business finance market. Further detail on how this funding will be made available will be provided at Budget 2013.
The Government’s own business finance schemes will be brought together within the new institution so that they are managed as a single portfolio. It will also seek to bring Government-backed business advice services closer together, harmonise their engagement with customers and co-ordinate them closely with finance interventions, to improve accessibility for SMEs.
It is expected the institution will operate on a commercial basis within a strategic framework set by ministers. Discussions will begin in January with the European Commission to ensure the proposals for the creation of the bank and the support Government would like the institution to offer are in line with state aid rules.
Keith Morgan has also been appointed to aid the Government in setting up the business bank. Starting in the new year, he will lead the team in Whitehall that will develop proposals for the design of the future bank.
Notes to editors:
1. The statement the Business Secretary made in the House is available on the parliament website: www.parliament.uk.
2. Sir Peter Burt will not receive remuneration for his role.
3. Sir Peter Burt has extensive experience in business banking. He started his career at the Bank of Scotland in 1975, working in the international and oil and energy department. He rose to become head of the international division in 1985, treasurer and chief general manager in 1988 and eventually Chief Executive Officer in 1996. Following the merger with Halifax, he served as Deputy Chairman of HBOS and Governor of the Bank of Scotland, (a largely ceremonial role) from 2001 to 2003. In 2004, he was appointed Chairman of ITV plc. He also served as a non-executive director of Royal Dutch Shell until 2006, Chairman of Dyslexia Scotland and on the boards of a number of charities. He is now the Chairman of Promethean, which is an advisory and investment firm that focuses on UK lower mid-market companies facing financial or other constraints in their businesses.
4. Keith Morgan was a Director and Head of Wholly-Owned Investments at UKFI, responsible for managing the Government's shareholdings in Northern Rock, Bradford & Bingley and UK Asset Resolution, until August 2012. He was a Non-Executive Director of Northern Rock plc until its sale to Virgin Money in January 2012. Keith joined UKFI from Banco Santander where he was a Director of Sovereign Bancorp in the USA, focusing on the integration of Sovereign into Santander. He was previously Director of Strategy & Planning at Abbey National, where he was a member of the Executive Committee, and was also Chairman of Santander's Asset Management and Credit Card businesses in the UK. Before joining Abbey in 2004, Keith spent 18 years at L.E.K. Consulting, where he was a partner specialising in financial services.
5. Members of the advisory group will be announced in the new year.
6. The government's economic policy objective is to achieve 'strong, sustainable and balanced growth that is more evenly shared across the country and between industries'. It set four ambitions in the ‘Plan for Growth’ (PDF 1.7MB), published at Budget 2011:
• To create the most competitive tax system in the G20
• To make the UK the best place in Europe to start, finance and grow a business
• To encourage investment and exports as a route to a more balanced economy
• To create a more educated workforce that is the most flexible in Europe.
Work is underway across government to achieve these ambitions, including progress on more than 250 measures as part of the Growth Review. Developing an Industrial Strategy gives new impetus to this work by providing businesses, investors and the public with more clarity about the long-term direction in which the government wants the economy to travel.