Earlier this week, the British Chambers of Commerce nailed their colours firmly to the mast by calling for interest rate cuts to continue to boost sluggish growth within the economy. This came just four days after the Bank of England reduced the cost of borrowing to 5.25 per cent.
With firms across the UK being hit hard by the growing credit crunch, a slowdown in consumer demand and a weaker demand for goods, the Chamber believes that the time has come for the Bank of England to make further cuts to boost the business sector.
Of course, it is not only the level of interest rates that are important but whether those cuts are then passed onto customers by the high street banks and, more importantly, whether our financial institutions are prepared to lend the money to businesses in the first place.
Given this situation, there was seemingly good news last week regarding a new package of funding for businesses in Wales. The Welsh Assembly Government announced a £150 million deal with the European Investment Bank (EIB) to provide a new pot of money to help fund small firms across Wales.
Half of this funding (£75m) is given to Wales to keep whilst the other £75m is repayable to the EIB over a period of time.
This sounds like wonderful news but, of course, the devil is in the detail.
The only reason we receive such funding is because two thirds of Wales is amongst the poorest of the whole of Europe. As such, given location and consumer demand factors, many businesses in parts of Wales remain disadvantaged as compared to businesses in the more prosperous parts of the UK such as the South East of England.
Therefore, one would expect that any such funding would be used to give businesses in Wales a competitive edge relative to firms elsewhere.
However, that is currently not the case. Despite being subsidised by European funding, the Assembly currently charges interest rates of 15 per cent or more for loans to businesses. This means that firms are being hit with ridiculously high charges well above those set by the Bank of England.
Does this make sense to you?
We are being given European funding to try and make our businesses more viable in Wales. As a result, the Assembly should be using this public money to subsidise lower interest rates, not charging levels that banks would not have the audacity to set, despite having to make a return for their shareholders.
It would seem that some have forgotten that the role of the Assembly is not to create a Welsh Investment Bank for its own gain but to ensure that Welsh businesses are given the opportunity to thrive and prosper.
I therefore hope that the Assembly Government will take a bold step and ignore the advice of its ‘safety first’ civil service in this matter. Instead of crippling businesses in our poorest areas with ridiculously high repayment rates, they should ensure that such firms are given the financial support they deserve, enabling them to invest in local jobs and a prosperous future for Wales.
With firms across the UK being hit hard by the growing credit crunch, a slowdown in consumer demand and a weaker demand for goods, the Chamber believes that the time has come for the Bank of England to make further cuts to boost the business sector.
Of course, it is not only the level of interest rates that are important but whether those cuts are then passed onto customers by the high street banks and, more importantly, whether our financial institutions are prepared to lend the money to businesses in the first place.
Given this situation, there was seemingly good news last week regarding a new package of funding for businesses in Wales. The Welsh Assembly Government announced a £150 million deal with the European Investment Bank (EIB) to provide a new pot of money to help fund small firms across Wales.
Half of this funding (£75m) is given to Wales to keep whilst the other £75m is repayable to the EIB over a period of time.
This sounds like wonderful news but, of course, the devil is in the detail.
The only reason we receive such funding is because two thirds of Wales is amongst the poorest of the whole of Europe. As such, given location and consumer demand factors, many businesses in parts of Wales remain disadvantaged as compared to businesses in the more prosperous parts of the UK such as the South East of England.
Therefore, one would expect that any such funding would be used to give businesses in Wales a competitive edge relative to firms elsewhere.
However, that is currently not the case. Despite being subsidised by European funding, the Assembly currently charges interest rates of 15 per cent or more for loans to businesses. This means that firms are being hit with ridiculously high charges well above those set by the Bank of England.
Does this make sense to you?
We are being given European funding to try and make our businesses more viable in Wales. As a result, the Assembly should be using this public money to subsidise lower interest rates, not charging levels that banks would not have the audacity to set, despite having to make a return for their shareholders.
It would seem that some have forgotten that the role of the Assembly is not to create a Welsh Investment Bank for its own gain but to ensure that Welsh businesses are given the opportunity to thrive and prosper.
I therefore hope that the Assembly Government will take a bold step and ignore the advice of its ‘safety first’ civil service in this matter. Instead of crippling businesses in our poorest areas with ridiculously high repayment rates, they should ensure that such firms are given the financial support they deserve, enabling them to invest in local jobs and a prosperous future for Wales.