British Business Bank ‘should increase influence’ in corporate life
THE state-owned British Business Bank must play a greater role in postCovid corporate life as taxpayer support becomes vital for propping up the economy, its founding chairman has said.
The raft of taxpayer-backed emergency loan schemes administered by the organisation should be extended beyond their current September cutoff date if they are still needed, according to Ron Emerson.
The schemes have funnelled £47.9bn to struggling firms since the disaster struck, with the cash handed out by banks on the understanding that the Treasury will cover the vast majority of their losses if borrowers default. This process was overseen by the BBB, which was set up after the financial crisis to help small and medium-sized businesses.
Mr Emerson, who led the organisation for three years and is now chairman of lender B-North, said: “What we are seeing is a different economic world where the role of government is going to be central in the way the economy works. What [Covid-19] has raised is the whole issue of financial infrastructure in this country across the board, and is it fit for purpose for the 21st century.”
The BBB was initially criticised by some large banks for slowing down the process of distributing vital funds, and any attempted power grab is likely to raise eyebrows within the industry.
Meanwhile, lenders to small and medium-sized companies are growing increasingly concerned that firms could collapse under the weight of the debt mountain taken on to survive Covid-19.
Caroline Stockmann of the Association of Corporate Treasurers said some of her members had warned of a “very ugly” second half of 2020. She said: “If large numbers of businesses are struggling and they don’t get any help, the economy is going to go into a worse and worse spiral.”
Ms Stockmann warned that mass defaults could mean banks themselves started to get into trouble.
She called for longer loan terms, but added that a solution was needed to protect banks too.