Speaking in the City of London yesterday Business Secretary Vince Cable said the UK's banks were "imperilling" the nation’s economic recovery through failing to meet lending targets to small and medium sized firms.
Dr Cable’s criticism of banking behaviours in the UK followed hard on the heels of Ed Miliband’s public indictment of bank lending for growth at EEF’s National Manufacturing Conference in London on Tuesday.
Cable’s fresh attack yesterday, in his annual speech at the Lord Mayor of London’s trade and industry banquet, echoed Miliband’s references to poor lending conditions for UK small and medium sized companies which were being constrained in their ability to grow due to finance access problems.
Yesterday Cable said UK SMEs are today receiving a “second division” banking service.
Setting himself apart from Mr Miliband however, Cable went on to deny the effectiveness of setting up a new British business bank – an idea Miliband proposed to EEF delegates in his vision for a British Investment Bank.
Cable had seemed to support this approach in a letter leaked earlier this week. But in his speech yesterday he back-tracked say that the idea would be unworkable because “we would run into problems with EU state aid clearance”.
Speaking of government’s role in regulating and incentivising UK banks to lend to smaller firms Cable spoke of Project Merlin, but also of a forthcoming credit easing scheme in which government will offer to underwrite the borrowing required for smaller firms. It is hoped this will spur the creation of cheaper business loans.