Cable says banks are imperilling UK’s economic recovery
Vince Cable wants smaller firms to find it easier to borrow funds
7 March 2012 Last updated at 22:41
Vince Cable has launched a fresh attack on the UK’s banks, accusing them of “imperilling” the country’s economic recovery.
Speaking in the City of London, the business secretary said banks were still not lending enough to small and medium-sized companies.
He said such firms were being offered a “second division” banking service.
Yet Mr Cable also used the speech to pour cold water on his own idea of creating a new British business bank.
The business secretary sparked controversy earlier this week when a leaked letter he wrote to the prime minister and deputy prime minister suggested that such a business bank should be carved out of Royal Bank of Scotland.
In his annual speech at the Lord Mayor of London’s trade and industry banquet, Mr Cable admitted the idea may not be workable, because “we would run into problems with EU state aid clearance”.
Mr Cable also said in his speech that the UK’s financial services industry remains “disconnected” from the rest of the economy.
He described the situation as a “yawning mismatch”.
He added that the government was continuing to look at ways of solving the problem.
“No-one can deny that the government is taking this problem seriously,” said Mr Cable.
“We feel that we have shown our commitment, but also recognise that we cannot do it alone.”
Highlighting the work of the government, Mr Cable spoke of the recent Project Merlin targets, which require the UK’s banks to meet targets for their lending to businesses.
He also gave further details of the government’s forthcoming credit easing scheme, under which the government will underwrite banks’ borrowing to small firms so they can pass on cheaper loans.
Further, Mr Cable said he looked forward to hearing the findings of a taskforce he set up to explore the issue of lending to businesses.
Led by Tim Breedon, the chief executive of Legal & General, the taskforce is due to publish its recommendations in time for this month’s Budget.