Business Secretary Vince Cable said there’s a “disconnect” between Britain’s London-based global finance industry and the rest of the economy, with companies struggling to raise loans from a “second division” banking system.
Getting loans to small companies remains a “big headache” for the government, and previous efforts to “browbeat” the banks into lending and his own call to transform the part-nationalized Royal Bank of Scotland Group Plc into a business lending bank have been imperfect, Cable said. The answer is to get the City of London more involved in the rest of the economy, he said.
“We have a financial-services industry in London that plays in the Champions League, with overseas owners to match, and a British business finance system which struggles in the second division,” Cable said in a speech to financiers in London last night, according to remarks released by his office.
Cable said last month his own coalition government lacked a “compelling vision,” arguing that efforts to narrow the budget deficit don’t amount to an economic plan for the future.
Those comments, made in a leaked letter to Conservative Prime Minister David Cameron and Liberal Democrat Deputy Prime Minister Nick Clegg, were published two days ago as Chancellor of the Exchequer George Osborne said this year’s budget will include no “unfunded giveaways,” reiterating his refusal to deviate from his austerity plans.
In his letter, Cable also suggested that the government should use part of RBS to create a business lender to support exports and industrial projects.
Cable said last night that a report he commissioned Legal & General Group Plc Chief Executive Officer Tim Breedon to prepare will propose ways of getting the City to channel money to small and mid-sized companies in the U.K.
Breedon is exploring how companies can raise money in capital markets, how rich individuals can invest directly in businesses, and how companies can finance themselves through partnerships in their own supply chains.
“A different and longer-term approach to this whole problem is needed: one that harnesses the positive qualities of a Premier-League financial sector down to ordinary businesses” and brings “U.K. business finance up to the higher divisions,” Cable said.