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ClimateNE & Climate Change Schools Project support the move to a low-carbon, resilient economy and help businesses avoid risk and realise commercial opportunities. Posts by Jen Atkinson, Krista McKinzey and Harriet Thew » WILL we ever see the day when the Bank of Tees Valley flies to the rescue of local businesses?
Perhaps we will, if local authorities follow the pioneering lead of Essex County Council to create its own bank.
The brainwave was sparked by complaints from local firms, which accused high street banks of taking lending decisions away from local branch managers to remote credit committees.
Under the proposals, the Bank of Essex would channel emergency funds from the European Investment Bank directly to businesses in trouble.
Since the Government's multi-billion pound bail-out of Britain's biggest banks, there has been precious little evidence that volumes of lending have increased to business, despite the protestations of the British Bankers Association among others.
The BBA claims that lending to small businesses grew by just under ã1bn in the third quarter, but that doesn't take into account the most recent period and conveniently forgets to mention the more unfavourable lending conditions and higher interest rates imposed by banks.
Other companies haven't even been as lucky as that, with some having their overdraft facilities withdrawn and being denied access to vital credit.
The Government's gentle persuasion is not rubbing off on banking chiefs because the bail-out money is still not getting through to businesses. The introduction of smaller, regionalised community banks with a sound knowledge of the local business environment could be just the tonic.
The difficulty is deciding on how they should be run, and by whom.
Would local businesses have a say? Would these new institutions be able to secure sufficient capital from institutional investors and pension funds? Would interest rates be more competitive than those offered by mainstream banks?
Banks run by local authorities could provide much-needed competition for the high street's big four, but the plans need to be well thought through and could take some time to come to fruition.
In the meantime, the Government should move quickly to finalise the ã1bn Small Business Finance Scheme announced in the pre-budget report to channel vital lending to firms in distress.
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