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Regional 'challenger' banks could aid economic growth

By Western Morning News  |  Posted: September 12, 2012

Vince Cable

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A Government-backed bank could prompt the growth of "alternative" lenders to hard-pressed business on the Westcountry high street, it was announced yesterday.

The new institution will lift the block on growth caused by the shortage of finance for firms that want to expand, Business Secretary Vince Cable said yesterday.

In a keynote speech unveiling the Government's long-awaited industrial strategy, Mr Cable suggested the bank could operate through alternative providers such as Handelsbanken – the Swedish bank operating successfully in the UK.

Handelsbanken, which has around 100 branches in the UK, including outlets in Plymouth, Exeter and Truro, are among a raft of "challenger" banks the government could support outside the "big five" high street institutions.

Others could include the Co-op and Aldermore, a bank dedicated to help small firms, Mr Cable said.

But the plans, at this stage, stop short of "local" or "regional" banks, which are said to have helped lending on the continent. Liberal Democrat activists want branches of state-owned Royal Bank of Scotland to be community banks.

Mr Cable admitted that details of the bank's size and how it will work are still being thrashed out as he outlined the Government's vision for industry.

It included strategies to support sectors in which Britain is felt to have a competitive advantage, such as aerospace, which has a strong presence in the wider South West. Other key sectors include automotive, life sciences, higher and further education, professional services, the information economy, construction and energy.

The Business Secretary also announced that £67 million of funding has been secured by 34 successful bids under the Employee Ownership scheme which enables firms to provide training for staff.

Among the winners were Spiral Construction of Helston, West Cornwall, which is leading a joint project on behalf of the Cornwall Manufacturers Forum, and Bridgwater-based logistics firm Langdon Industries, which will improve training for heavy goods vehicle drivers.

In a briefing with regional political journalists in Westminster, Matt Hancock, newly appointed Business Minister, said the bank would help "unblock" the problem of small and medium sized businesses – which many believe is at the heart of holding back growth in the British economy.

Asked whether it would bring about more regional banks, he said: "There are regional banks starting to pop up. That isn't a part of the business bank proposition at the moment.

"But the banking system is hugely centralised in the UK, and one of the things we do aim to do through the business bank is support the 'challenger' banks – and some of them may be regional."

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