The Government has announced the first steps in a Government-funded bank to help small and medium sized businesses.
The new bank will aim to attract private sector funding so that when fully operational, it could support up to £10 billion of new and additional business lending.
The business bank will address long-standing, structural gaps in the supply of finance, identified in Tim Breedon’s report on non-bank finance.
The bank will operate at arm’s-length from Government. It will be professionally run and commercially focused. It will facilitate the provision of loans, including long-term capital, to UK firms through banks and other financial institutions. By harnessing the power of capital markets, it has the potential to transform business finance in the UK.
It will bring together in one place Government finance support for small and mid-sized businesses. It will also control the Government’s interests in a new wholesale funding mechanism which will be developed to unlock institutional investment to benefit small businesses.
The new institution will operate through the wholesale markets, it will not have any retail presence and will not displace or subsidise banks. Its role is to encourage the development of private sector solutions and enable the market to work properly, not compete with it.
More detail on the design of the bank and the types of interventions it will support will be provided in the autumn.