U.K. Prime Minister David Cameron should create a single agency to help channel billions of pounds of loans to small companies, a government-appointed panel said.
The committee, led by Legal & General Group Plc Chief Executive Officer Tim Breedon, estimated in a report published today that businesses face a potential funding gap of as much as 191 billion pounds ($300 billion), with small firms accounting for 59 billion pounds.
The committee was set up to recommend ways that small companies can bypass banks to get credit from other sources. Its findings come as Chancellor of the Exchequer George Osborne prepares to begin a 20 billion-pound program of credit easing. Osborne will present his annual budget to Parliament March 21.
“We find ourselves in a period of deleveraging and credit restriction where businesses are frustrated by lack of access to capital of all kinds,” Business Secretary Vince Cable said in a foreword to the report. “A different and longer-term approach to this problem is needed.”
Royal Bank of Scotland Group Plc CEO Stephen Hester told business leaders yesterday he’d be “delighted” if the bank lent more to companies this year, though in uncertain times borrowers are choosing to pay off their debts.
RBS, Lloyds Banking Group Plc, HSBC Holdings Plc, Barclays Plc and Santander U.K. collectively lent 214.9 billion pounds to business under the so-called Project Merlin deal of 2011, beating a target agreed with the government by 13 percent.
They lent 74.9 billion pounds to small and medium-sized companies, defined as those with revenue of less than 25 million pounds annually, 98.6 percent of the amount pledged under the Merlin deal. That was a “disappointing” result, U.K. Treasury minister Mark Hoban said in February.
Cameron should consider merging government agencies into a single entity along the lines of Germany’s state-owned development bank, Kreditanstalt fuer Wiederaufbau, according to the Breedon report, which recommends the government sets up a program to give companies business-finance advice.
It also called for a single agency to channel money from capital markets to small and medium-sized companies. Individuals could be encouraged to buy corporate bonds by setting up electronic “retail-dedicated gilt products” through existing stock exchanges, it said.