Member Article

Look abroad for economic inspiration says FSB

The Federation of Small Businesses (FSB) is urging the Government to look abroad for imaginative solutions to financing UK economic growth.

In a recent report, ‘Alt+ Finance: small firms and access to finance’, the FSB considered a number of examples of best practice from German and US banks.

This highlighted a number of issues within the UK lending model, including a lack of transparency and diversity of financial institutions, as well as a limited local focus and control of lending decisions.

The FSB is now calling on the Government to consider innovative funding measures, including an increase in peer-to-peer lending, the introduction of asset backed finance into the Business Finance Partnership £1 billion fund and the creation of a debt bond market for small businesses.

They have also suggested introducing Community Development Finance Institutions into the mainstream, following the success of these organisations in the US where they have received much Government support.

The FSB believes that consideration of these suggestions will allow the Government and the wider business community can create the kind of financial infrastructure we need to underpin our economy and support small firms to grow.

Commenting on the report, FSB North East Regional Chairman Ted Salmon said: “It is only when you compare bank lending in the UK to the situation in countries like Germany and the US that you can see the extent to which our banking system fails to deliver what small businesses and Real Life Entrepreneurs in the North East need.

“Too much time has been spent tinkering with the existing system when it is perfectly clear that we need to develop alternative routes to finance.

“We need to accept that in its current form, our banking structure might never fully cater to the needs of the UK’s business community, and we now need to build alternative routes that connect savers and investors with viable small businesses eager to grow, and thereby introduce innovation and competition to the sector.”

Tony Greenham, head of finance and business at New Economics Foundation echoed Ted’s sentiments. He believes that a global vision of the banking system has led to many local blind-spots and left the UK consistently under-performing when it comes to supporting SME finance and regional growth.

He added: “We need a richer diversity of financial institutions and funding sources to suit the needs of our innovative and entrepreneurial smaller companies.

“This report moves the debate beyond berating big banks and instead offers a host of complementary and cutting-edge alternatives that can help the UK build a world-class domestic financial system to equal the City’s status as a world-class international financial centre.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .

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