UK to expand finance for smaller firms -Darling

September 14, 2009

BRITAIN/    LONDON, Sept 12 (Reuters) – Britain is looking at ways to  expand credit lines to smaller companies that currently have to rely almost entirely on banks for their funding, finance minister Alistair Darling said on Saturday.
   In an article for the Observer newspaper, Darling also reiterated his forecast that growth would return to the British economy by the turn of the year but said some G20 countries still needed to deliver their promised fiscal boosts.
   “We are working on proposals to help broaden the sources of finance available to firms,” Darling said.
   “In the same way that big companies can access funding directly from capital markets, by issuing bonds or commercial paper, I want to start creating a different financial model in the future, in which small companies get funding from sources other than banks.”
   Many smaller firms have struggled to secure credit lines from the hard-hit banking sector during the recession, putting their survival at risk. 
   Small companies in Britain tend to do all their banking with one institution, making it difficult to get hold of finance if their regular bank turns them down.
   Treasury figures show more than 90 percent of loans to small and medium-sized companies come from the big four British banks — Barclays <BARC.L>, RBS <RBS.L>, Lloyds <LLOY.L> and HSBC <HSBA.L>.
   Darling is expected to use his forthcoming prebudget report to address such competition issues, including looking at ways to allow smaller companies to access funding more directly from institutional investors.
   “If there is one lesson to be learnt from this crisis, it is that credit must never be allowed to dry up because of reliance on a small number of banks,” Darling said.
   The measures, which may require regulatory and structural changes, could involve investors buying securities which fund packages of loans to smaller firms or investor pools of capital that could be used as a direct source of capital.
   Darling said there were signs the global recession was coming to an end but said countries could not afford to take the recovery for granted and must ensure stimulus promises were followed through.
   “Simply announcing a new policy is not enough,” he said. “Some countries still have to implement much of their promised boost to their economies.”
   (Reporting by Matt Falloon, editing by Mark Trevelyan)
   ((UK Economics desk, uk.economics@reuters.com, Tel: +44 207 542 1894))
 Keywords: BRITAIN DARLING/
  
Saturday, 12 September 2009 23:00:30RTRS [nLC400859 ] {C}ENDS

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