Credit easing: The business reaction
Posted by BusinessZone.co.uk in Finances, Regulation on Tue, 04/10/2011 - 10:32
Boosting small business access to finance through credit easing was the big announcement by chancellor George Osborne at the Conservative Party conference. Here's the reaction from the business community.
John Sollars, managing director, Stinkyink.com:
"When chancellor George Osborne stood up and announced that the government were implementing 'credit easing' for businesses, I initially thought that he was talking about the quantitive easing that the Bank of England has been running during the worst of the banking crisis. However, when I fully understood the implications of the plan I thought it was probably the most exciting thing the chancellor could do for business.
"After months of talking to the banks about lending to small businesses the government has finally stood up and said 'Enough - we'll do it ourselves'. As I understand it, HM Treasury is going to stand guarantee for small business loans or even enable, through the Bank of England, loans directly to business. I believe that this could make a real difference to a host of SMEs up and down the country and could beneficially, & directly affect employment prospects for many people."
James Leavesley, co-founder, CrowdControlHQ
"The proposal for credit easing to release money directly to small businesses is a very welcome move and potentially could be a confidence booster which will help deliver growth across the UK. However, the key to this is making it work.
"At this stage the proposals appear very positive, but they are just that – proposals, and would need to be properly worked up soon. Smaller companies need credit to survive and whilst this all seems very welcome news at this stage, it is important that reality matches up with the theory for it to be effective and beneficial to SMEs. Previous Government-led initiatives for business have been well intended but poorly executed."
Charlie Mullins, managing director, Pimlico Plumbers:
"You have to admire the chancellor's nerve above all else. With the markets going crazy, even the prospect of the UK’s credit rating being downgraded, as happened to the US recently, he has once again, calmly stuck to his guns. And those guns tell him that borrowing more money to solve a problem caused by borrowing too much money in the first place is no way to dig the country out of its financial hole. This all sounds like my kind of financial common sense, but with some very influential people on his side of the house calling for top rate tax cuts and a lower VAT rate, they must have been hard to resist!
"But by far the most significant announcement he made was that the Treasury would begin boosting cash starved private businesses with injections of cash through the purchase of bonds [in the private companies], as well as improving access to loans.
"This new policy of 'credit-easing' is hugely significant and could be the game changer we have been looking for. By abandoning quantitative easing - which relied on banks passing on newly 'created' cash that businesses desperately need - the chancellor has cut out the middle man, getting it from the Treasury to the high street without passing through those pinstriped parasites. By passing the money directly to cash starved businesses, George Osborne, has written the crooks in suits right out of the equation, and not a moment too soon!"
John Longworth, director-general, British Chambers of Commerce:
"The measures announced by the chancellor at the Conservative Party conference will be welcomed by many businesses. Reforms to the employment tribunal system and rules around unfair dismissal, investment in new infrastructure to deliver growth across the UK, and new policies to get credit flowing to firms are all good news for business.
"Investment in infrastructure, be it in transport, digital or energy networks, is crucial to delivering growth across all regions in the UK. The new Enterprise Zones will also help to stimulate growth in those regions affected most by the cuts by BAE Systems. Credit easing could help solve the problems in delivering much-needed credit to businesses, but the devil will be in the detail as to how this could work. These are all announcements that will give businesses confidence, who will be encouraged by chancellor's focus on driving the recovery through a prosperous and enterprising private sector."
John Cridland, director-general, Confederation of British Industry:
"Small firms need credit and, with the continuing Eurozone crisis, banks can only do so much, so the proposal for credit easing to get money directly into the hands of smaller businesses could be just what the economy needs, if it can be made to work. But these are uncharted waters and these proposals need to be fully worked up as quickly as possible."
BusinessZone.co.uk is providing full coverage of the Conservative conference.
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