HM Treasury

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02 February 2010

£700 million lending boost for UK businesses

Over £700 million of affordable and easy to access funding from the European Investment Bank (EIB) has been approved for nearly 3,000 small businesses across the UK, through participating national banks.

At the 2008 Pre-Budget Report, the Government announced that small and medium sized enterprises (SMEs) could benefit from up to £4 billion of EIB finance between 2008-2011. Small businesses access the funds through intermediating national banks, which then lend the finance on a matched funds basis. In the first year the target was for UK banks to secure £1 billion of finance for SMEs from the EIB. This was achieved, with banks having now secured a total of £1.39 billion from the EIB.

Together with a range of other measures being implemented by the Government to support UK businesses, this scheme will help to ensure that well managed small businesses in the UK continue to have access to the best support available.

The Economic Secretary to the Treasury, Ian Pearson MP, said:

“Support for SMEs is key to driving growth in the UK, so I am delighted that small businesses are benefiting from this finance. This forms part of the Government’s continued commitment to help SMEs access the finance they need to take their businesses forward, which is vital to our long-term growth strategy.

I want to encourage all businesses to get in touch with their local banks to find out if they can get access to this funding; it is an easy process and certainly worth pursuing”.

Simon Brooks, European Investment Bank Vice President said:

“The EIB’s ongoing support for small and medium sized enterprises in the UK through cheaper, simpler and more flexible loans will enable increased investment to expand business opportunities and create new jobs in difficult times. We wish to encourage continued contact between firms and partner banks to allow more companies to benefit from the extensive financial support available.”

John Wright, National Chairman of the Federation of Small Businesses (FSB), said:

"The FSB welcomes the news that nearly 3,000 SMEs have benefited from low cost EIB loans. We continue to urge non-participating banks to enter the scheme to make the loans available to more SME clients. Tracking research by the FSB shows that credit conditions for SMEs continue to stabilise, with more requests for credit being accepted. Further promotion of EIB loans will continue to help the smallest companies through the recovery."

Notes for Editors

1. The Government continues to reaffirm its commitment to making, wherever possible, finance available to SMEs with sound business propositions, reflecting a shared understanding of the real difficulties that many small firms face as a result of the current difficult economic climate.

2. List of case studies

3. In this context, HM Treasury recognises the important contribution that the EIB can make in providing additional financial support for small businesses in the UK, including where it is able to make funds available to create financial benefits for SMEs. HM Treasury strongly welcomed the recent reforms by the EIB to modernise and simplify its SME loan products, as well as the increase in EIB lending ceilings for funds aimed at small firms from €15 billion to €30 billion (£27 billion) between 2008-11.

4. The EIB is the long term lending arm of the European Union. As an AAA credit rated financial institution, able to raise funds on the capital market at advantageous rates, the EIB supports SME investment through ‘Loans for SMEs’. These loans are credit lines made available to national and regional intermediary banks, which then lend on the finance to SMEs that meet EIB criteria as well as that of the specific intermediating bank. The Bank has developed links with around 120 intermediaries across the EU, historically disbursing in the region of €5 billion a year to SMEs.

5. The 2008 Pre-Budget Report announced that UK SMEs stand to benefit from up to £4 billion of EIB finance between 2008-2011 and committed to secure £1 billion of this by the end of 2008, which was achieved. Participating UK banks have so far secured £1.39 billion of funding for SMEs from the EIB and approved £726 million worth of loans for 2,769 small businesses. This includes a small allocation by an Irish bank to Northern Irish SMEs.

6. UK banks that are, or have been, involved in this scheme include Bank of Scotland (HBOS), Barclays Bank, Close Brothers, Lloyds TSB, Royal Bank of Scotland (RBS, inc. NatWest), Santander UK and Ulster Bank (for Northern Ireland, also part of the RBS Group).

7. The initiative forms part of the Government’s wider efforts to deliver more support for SMEs at this time, which also include:

8. Further information about the EIB and the EIBs support for SMEs is available on the EIB website.

9. The Federation for Small Business (FSB) is a UK business organisation with over 213,000 members. It exists to protect and promote the interests of the self-employed, and all those who run their own business. More information is available on the FSB website.

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