Will the Government's Business Bank Kick Start the Economy?

The vehicle licensing statistics released by the Department for Transport last month showed the impact of the credit crunch on SME's. Shining a new light on the struggles that many small businesses are going in these tough economic times.

The figures show that, despite a small quarter-on-quarter increase, registrations of new heavy goods vehicles have fallen through the floor since 2007. And while registrations of light goods vehicles continue to grow, the rate at which it's happening has slowed considerably over the past five years.

The report states that "the prevailing economic situation" is having a "noticeable influence", rather too euphemistically saying what owners of SMEs across the country have been saying since the crunch began – times are still tough. And, for many SMEs, five years on from the credit crunch, getting access to finance from high street banks is still as tough too.

So news of the government's planned Business Bank, to be funded using £1bn of public money with the rest, up to 10bn, from private sources, should raise some cheer amongst cash-strapped small business owners. Details about the exact nature of the bank's operations have yet to be announced but it wont have branches and is unlikely to provide the services expected of the high street bank. What seems more likely is the bank will act as a "wholesale bank" making it easier, and commercially more attractive, for other banks to lend to businesses.

While this is undoubtedly good news, and a move that we at Navman Wireless support, it does feel a little like déjà vu. Similar schemes, such as the Fund for Lending and National Loan Guarantee Scheme, have only recently been launched but have not helped stimulate borrowing levels. For any new scheme to be a success, it needs to lower the barriers for access to funding and come with the guarantee of long-term support for small business owners to feel confident enough to look for external funding.

What's a more immediate worry, though, is the time it's going to take to set up the new bank. It will be eighteen months before the bank is running which, for many companies desperate for finances today, will be eighteen months too long.