VINCE CABLE’S small business bank will have little impact on the economy, Ernst & Young’s Item Club warned yesterday, due to a lack of funds and competition with private lending sources.
Small and medium enterprises (SMEs) face a funding gap of around £19bn over the coming year, according to Item estimates, but the government’s British Business Bank (BBB) will have a capacity of only around £10bn.
“The figures suggest that the BBB’s lending capacity could be exhausted in less than a year,” said Carl Astorri at Item, who said new funding could crowd out existing funding sources, diluting its impact further.
“We expect the BBB will have to compete for projects that are commercially viable, so we do not think the scheme will have a tangible impact on the economy,” he added.
This came in a climate of reduced business lending across the board, the report showed. Corporate lending will shrink 4.6 per cent over 2012 as a whole, hitting £429bn, the lowest level since 2006, Item forecasts.
Though Astorri said 2012 would be the last year of severely depressed lending, he did not put this down to government intervention, saying that much government policy, particularly capital requirements, pushed in the other direction.