SMEs and umbrella companies have been struggling to get much needed finance from the banks and Vince Cable has now put forward the government’s proposals to force the banks to make more funds available for small companies, including limited company contractors.
At the weekend, Mr. Cable had said that the government is very concerned that the banks are not acting in the interests of the nation. “I don’t think they get it” the business secretary was quoted as saying.
Amongst other measures, the business secretary is considering implementing a new tax on the profits of those banks which refuse to support viable businesses. Cable also points out that £50bn of new finance could be released if banks slashed payouts to their staff and shareholders.
Another of the measures designed to help small businesses is the extension of the Enterprise Finance Guarantee scheme beyond the original expiry date of March 2011. The EFG was introduced by the Labour government but lending under the scheme dropped by 23% in the half year to March, compared with the previous six months. In June, the government increased the amount available through EFG to £700m, a rise of £200m.
Also under consideration are regional stock exchanges and new ways to encourage venture capitalists to invest in a broader range of businesses.
Vince Cable’s proposals were laid out on Monday in a Green Paper entitled ‘Financing a private sector recovery’ in which it was acknowledged that SMEs are vital to the UK economy and could contribute significantly to the UK’s economic growth.
The Green Paper was welcomed by employers’ organisations who believe the government should be adopting a tougher approach with business bank accounts. Accounting professionals, on the other hand, were a bit more cautious saying that the economic environment encourages banks to lend, not Green Papers.
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