The Institute of Chartered Accountants in England and Wales said that proposals published by the Government last week have added to fears that the state bank will do little more than consolidate existing finance schemes.
The bank is designed to address long-term problems with provision of finance to small and medium-sized companies (SMEs). It will manage £3.9bn of “government resources” – £1bn of it being new money – and bring together existing programmes under one roof. It will also be able to develop new methods of access to debt and equity for SMEs.
However, David Petrie, the ICAEW’s head of corporate finance, said the strategy update suggested the state bank won’t “address the needs that businesses have”.
The ICAEW is concerned that the smallest businesses are being overlooked, and that the institution will have no direct relationship with companies, reports The Telegraph.
“Advice shouldn’t have been sidelined from the process,” Mr Petrie said.
Adam Marshall, director of policy and external affairs at the British Chambers of Commerce, said the Government had outlined “reasonable first steps”.
However, he added: “The long-term vision has to be much bigger – this has to be about a major new player that can support wholesale SME finance and work directly with businesses to plug the gaps where the private sector fears to tread.”
The BCC, which has long called for the creation of a state bank, also fears that £1bn of new money will be inadequate.
“It will need a massive additional injection of capital to sit alongside state institutions in our competitor countries. A minimum of £10bn of capital is needed for the Business Bank to be a game- changer.”
The ICAEW also expressed dismay at the bank’s initial base, in the offices of Capital for Enterprise (CfE), an existing government SME finance body, in Sheffield. “The proposals amount to little more than a respray of the CfE scheme,” Mr Petrie said. “Past measures to improve both the awareness of CfE’s funds and the number and nature of businesses it invests in have failed. Perhaps that’s because it’s neither close to the financial centre nor across the regions.
“If not London, it should have been in one of the other major centres – Birmingham, Manchester or Leeds. Presumably they’ll be spending taxpayers’ money travelling back and forth from London to Sheffield.”
The Government still requires European Union state aid clearance for the bank, which is not expected until the autumn of 2014.
“[This] highlights how far off the Business Bank is from being open for business,” Mr Petrie said.
A Business Department spokesman said: “Work on the Business Bank is well advanced and already helping to meet the financing needs of the UK’s small firms. The Business Bank will, of course, build on the success of the existing infrastructure, such as Capital for Enterprise, but will represent a step-change in the scale of government programmes and commitment to the sector.
“The report from the advisory group will ensure the Business Bank has the right priorities and direction, and the recommendations are being considered carefully.”