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Bank Services: Small Businesses

Volume 486: debated on Tuesday 13 January 2009

To ask the Chancellor of the Exchequer what recent assessment he has made of the effect of the Government's policy on bank recapitalisation on the availability of credit to the small and medium-sized enterprise sector in Peterborough; and if he will make a statement. (244232)

[holding answer 16 December 2008]: I refer the hon. Gentleman to the answer I gave the hon. Member for West Ham (Lyn Brown) on 30 October 2008, Official Report, column 1189W.

To ask the Chancellor of the Exchequer what recent steps the Government have taken to aid banks in providing capital to businesses. (245467)

On 8 October 2008 the Government announced a comprehensive package of measures to support stability of the financial system, protect ordinary savers, depositors, businesses and borrowers, and to safeguard the interests of the taxpayer.

As part of their investment, the Government have agreed a range of commitments with banks accessing the recapitalisation scheme. The Government expect banks to restore and maintain the availability and active marketing of competitively priced lending to SMEs, at a level at least equivalent to that of 2007, until the end of 2011.

UK Financial Investments Limited (UKFI), which is wholly owned by the Government, will also oversee the conditions attached to subscribing to the Government's recapitalisation fund, including in relation to SME lending.

British small businesses should also be able to benefit from around £4 billion of lending from the European Investment Bank (EIB) between 2008 and 2011. As announced in the pre-Budget report in November 2008, after negotiations between UK banks and the EIB, £1 billion of EIB funds were approved by the end of last year to be available to British small firms. The Government continue to work with UK banks and the EIB on the use of EIB loans to deliver the most effective support to small firms with sound business propositions. It is a condition for banks participating in the Government's recapitalisation scheme to seek EIB Loans for SMEs.

Furthermore the Government announced a package of support to help smaller businesses at the Pre-budget report 2008. This package included the establishment of the Small Business Finance Scheme, an Export Credits Guarantee Department scheme, and the equity or quasi-equity capital fund. When combined this package will facilitate over £2 billion of extra support to SMEs experiencing short-term financial difficulties.