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PBR: Mandelson promises “bold and serious response” to SMEs

Business secretary Peter Mandelson has promised that the Government will deliver a “bold and serious response” to small business lending in today’s pre-Budget report.

In a speech at the CBI annual conference, he outlined plans to offer more finance and more flexibility between small businesses and banks. He told the CBI that “banks would be cutting off their noses to spite their faces” if they did not deal fairly with SMEs.

He said: “Behind the headlines are tens of thousands of companies fighting for cash-flow or credit.

“That means we must help strong and viable businesses stay in business. It means doing everything we can to ensure that demand in the British economy remains strong.

“We have given the banks the cushion of recapitalisation to protect them through the downturn. And we all recognise that there will be a correction in banks away from the risky lending that provoked the credit crunch.

“But we need to be clear that excessive risk-aversion in lenders will do as much damage as excessive risk taking to both the long term health of the economy – and to the banks ability to strengthen their balance sheets and act prudently in the long term interests of their shareholders.”

Mandelson said that Britain needs “good, plain, bankers” to help small businesses fiscally.

“If, locally, the banks are tightening their grip on credit at precisely the time when we need them to start lending again; if banks are unilaterally reorganising overdrafts or withdrawing them altogether are true; and if it’s the case that new terms are being issued by email, with immediate effect, or 48 hours to comply, sometimes without even a face-to-face meeting being granted – if these things are true then they will mean real damage to the economy.”

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Corporate climbers

What a depressing time – falling markets, layoffs everywhere and a continuous diet of gloomy news. All this will lead to further falls in interest rates and I expect another cut in December with more to come later. I would not be surprised to see rates below 2 per cent by February.

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