Business and Enterprise Committee

24 July 2009 (PN 56)

Publication of report: The Enterprise Finance Guarantee Scheme

COMMITTEE WARNS BANKS: WE ARE WATCHING YOU

The Business and Enterprise Committee publishes its Tenth Report, The Enterprise Finance Guarantee Scheme, on 24 July 2009 at 00.01hrs.

The Committee notes that when lending dried up after the credit crunch there were criticisms of lack of speedy government help for business. The Enterprise Finance Guarantee Scheme was introduced on 14 January to help the flow of credit to small and medium size enterprises. Baroness Vadera described the scheme as €œto help those at the margins€; some problems arose because expectations were raised too highly, in part because of inaccurate reporting. However, when the Committee took evidence on 2 June, the witnesses agreed the scheme was working well. The Committee concluded:

It is important we recognise when the Government does get it right. Although it is limited in scope and cannot help all struggling businesses, the Enterprise Finance Guarantee scheme now appears to be working well, after a relatively slow start.

However, the Committee expresses concern about the potential behaviour of some of the banks involved in the scheme and invites evidence from businesses to monitor this.

The Government left the decision as to which companies should benefit from its financial guarantees to the banks. In the Committee€™s view this places a great responsibility on the banks to ensure that those eligible for the scheme benefit from it. While it is understandable that, in some cases, banks have had to refuse companies access to the scheme because they have doubts about the long-term viability of the business, Committee members have also been made aware of cases where banks are not offering companies a choice, instead offering single measures, such as factoring, to businesses which would be eligible to benefit from this scheme.

Therefore, to coincide with the publication of today€™s Report, the Committee are inviting businesses to submit evidence if they feel they have had experience of this happening.

Peter Luff, Committee Chairman, said:

€œWhile we are largely impressed by the way the EFG scheme has been handled, it depends on banks offering appropriate help to their customers. We will be monitoring whether the scheme is being offered appropriately, and will return to this issue in the autumn if necessary, after having heard directly from businesses. We encourage as many businesses to submit evidence to us as possible.€

The detailed press notice calling for evidence is PN51, also published today.

For any media inquiries call Laura Humble, Select Committee Media Officer, on 0207 2192003/ 07917 488489.

Notes:

The Enterprise Finance Guarantee (EFG) scheme, announced by Lord Mandelson on January 17, was designed to increase the availability of credit at the time when the banks had tightened lending conditions and became more risk averse. According to the then BERR the €œ£1.3bn scheme will support bank lending, of three months to 10 year maturity, to UK businesses with a turnover of up to £25 million who are currently not easily able to access the finance they need. It will enable them to secure loans of between £1,000 and £1 million through the Government guarantee and is available up to 31 March 2010.€

While the Committee is interested in hearing companies€™ experiences, it will not be able to intervene in individual cases, or make judgments as to whether companies are financially viable. These should be sent, as an MS Word document, of no more than eight pages, by e-mail to [email protected] with a single hard copy sent to the Clerk of the Committee at the address above.

Once submitted evidence is the property of the Committee and should not be published without the Committee€™s consent. The Committee will usually publish evidence it receives, both in printed form and on the Internet. If you wish your evidence to remain confidential, please contact the Committee staff. Before submitting evidence, please read the guide to submission of written evidence at: http://www.parliament.uk/parliamentary_committees/witness.cfm

Further Information:

Committee membership is as follows:
Chairman: Peter Luff MP (Con) (Mid Worcestershire)
Mr Adrian Bailey (Lab) (West Bromwich West)
Roger Berry (Lab) (Kingswood)
Mr Brian Binley (Con) (Northampton South)
Mr Michael Clapham (Lab) (Barnsley West and Pen.)
Mr Lindsay Hoyle (Lab) (Chorley)
Miss Julie Kirkbride (Con) (Bromsgrove)
Anne Moffat (Lab) (East Lothian)
Mr Mark Oaten (Lib Dem) (Winchester)
Lembit pik (Lib Dem) (Montgomeryshire)
Mr Anthony Wright (Lab) (Great Yarmouth)

Media Enquiries: Laura Humble, Tel 0207 219 2003/ 07917 488 489, email: [email protected]
Specific Committee Information: Tel 020 7219 5777, email: [email protected]