The Chancellor George Osborne yesterday announced a programme of ‘credit easing’ to help small businesses develop.
The Treasury said the so-called credit easing could inject ‘“billions definitely, tens of billions possibly’’ into small businesses and encourage the development, over the medium term, of a more effective market in small business bonds. Essentially, the government will buy the debt of small firms via bonds.
In the short term, the policy should provide much-needed finance for businesses struggling to secure loans on favourable terms from the banks. However, the policy will not add to the state deficit, because the Government will be obtaining assets in return for its investment.
The move has been tentatively welcomed by the Federation of Small Businesses (FSB), which said the devil would be in the detail. But, David Kern, chief economist of the British Chamber of Commerce questioned the appetite of banks to buy the debts of small companies.