Will there be a British Business Bank?

RBS Vince Cable was over-ruled over a break-up of RBS

So what is the state of play on the government's ambition to correct the perceived lack of credit for small and medium-sized businesses?

Well, the Treasury and the Business Department concede that Vince Cable has been over-ruled on the break-up of Royal Bank of Scotland, which he argued for in the letter I disclosed yesterday.

A Treasury source said: "We have already changed the strategy to radically shrink and de-risk the investment bank (belonging to RBS) and focus on the UK commercial bank. So not very different in practice to Vince's proposal, but we are doing it in a way that doesn't destroy millions of pounds for taxpayers".


As for Mr Cable's colleagues, they insist his proposal for the government to create a new British Business Bank, that would concentrate on lending to smaller businesses, is not dead - although he concedes such a bank will not be created by dismantling RBS.

In that sense, Mr Cable seems to be closer to Labour's leader, Ed Miliband, who is also pushing for such a bank - he calls it a British Investment Bank- than to George Osborne.

Will we ever see such a new state-owned lender?

Well much will depend on whether the Treasury's preferred policy, of getting the current big banks to provide subsidised loans to smaller businesses - through its "credit-easing" policy - is showing that it will have impact.

And we should know more about that in the next few days - when we will learn whether all the banks have signed up for credit easing and whether they do so with great enthusiam for its likely efficacy.

As luck would have it, I am about to board a plane to Germany - whose fearsomely effective Mittelstand manufacturers have the perceived advantage of access to a very supportive banking sector, that takes the long term view of their prospects.

For as long as I can remember, British politicians have bemoaned that the City does not take a Germanic long-term approach to supporting smaller businesses. Will they now despair of the private sector and do it themselves?

Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 178.

    #176 FTP - well we don't know if France or Germany misbehaved. If they didn't, we need to find out how they got around it. If they did, then we need to assess the consequence of breaking the rules.

    Employment in this country should not be seen as a pawn in respect of legal niceties if they are widely ignored internationally by our closest business partners.

  • rate this

    Comment number 177.

    128.DevilsAdvocate "'Verde'"

    The scuttlebutt is that this spin off may be not what it appears to be, but just a few uneconomic branches with a large and uneconomic cost base 'carefully' created mostly by accident by a huge and oversized bunch of hooray-henrys for a gigantic cost to its parent.

    So don't hold your breath!
    The EU demanded it & is overseeing it.

  • rate this

    Comment number 176.

    Buy from those who provide the product at the best price relative to quality. Just bec the French & Germans don't behave is no reason for the UK not to do so. If Germans are subsidising train makers then take case to WTO. UK prosperity was founded on trade & long may it continue to advocate such. Favouring local industry over best option in the end does no one any favours. Sorry no!

  • rate this

    Comment number 175.

    #174 - my point is that if you write the contract in terms of infrastructural aims, like local employment, then you would either use a British based company or indirectly force a supplier to benefit employment here.

    It seems that Germany and France can get round these rules but somehow we are unable and I'm fairly certain we are the weak link not their ability to follow rules. I may be wrong.

  • rate this

    Comment number 174.

    172. I believe the choice was largely determined by EU competition policy.


Comments 5 of 178



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