Any doubts that the UK coalition government intended to stimulate lending to SMEs as a priority were dispelled with its announcement of a new state-backed business bank last September. The aim of this new institution is to provide £1 billion ($1.63 billion) of new capital to help promote access to finance for SMEs with turnover of up to £25 million and mid-sized businesses with turnover of between £25 million and £500 million.
"The British Business Bank is being set up as a state-backed economic development bank charged with creating more effective and efficient finance markets for smaller businesses across the UK," says Ron Emerson, the bank’s recently appointed chairman. "We do this by bringing together public- and private-sector funds to address market weaknesses in the supply and diversity of finance – acting as a catalyst, if you like."
Bank lending to small and medium-sized corporates in the UK has generated additional political sensitivity following the recent publication of Laurence Tomlinson’s report into SME lending by RBS, which alleges that it drove some small businesses into insolvency to seize their assets. RBS, the largest bank lender to SMEs in the UK, has launched an inquiry into the matter.
