June 10, 2014

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We have many excellent businesses in Formby, Crosby and Maghull where people work hard, where staff do a great job and where our communities benefit from the jobs and the economic benefits available.

But many of those same businesses are banging their heads against a brick wall with the banks. 

I heard of one business which was offered a loan by their bank at 20% interest. This at a time when the Bank of England base rate is just 0.5%, the lowest it has ever been. 

And for most business owners who talk to me, even that 20% is out of reach as the banks simply will not lend to them. 

These are businesses often with a good track record, who have repaid their loans in the past and who are doing a great job remember. So something has gone wrong. 

The government has made much over the last four years of its funding for lending scheme and of project Merlin, both of which were supposed to make sure the banks started to lend to businesses. But those schemes have completely failed to deliver.

And yet it doesn’t have to be this way. 

The other day, I visited the head office of Cumberland Building Society in Carlisle. The Cumberland offers a full business banking service. They lend money and have business bank accounts. And they support the businesses who are their customers. In short they do what the banks don’t do. 

But one reason for the success of Cumberland Building Society is that they only work in the their local area. They know the local economy and have good relationships with their customers. They are in a strong position to advise as well as to lend money and provide bank accounts and credit cards to their business customers.

Cumberland building Society does not operate in Sefton so businesses here don’t have an alternative to the big banks when it comes to having a bank account and full banking services.

But for most businesses here what we really need is a local bank that does what Cumberland Building Society does in its area. That is what happens in Germany with huge success for businesses and banks alike and that success is a big reason why the German economy is so strong.

We can learn from good practice elsewhere. And that is why Labour will set up a network of regional banks to do what happens in Germany and to take the best of what organisations like Cumberland Building Society. 

Good local banks, which support businesses in their areas can make all the difference to jobs and prosperity and I shall be working on this idea with some of my colleagues in the run up to next year’s election.

Small businesses can create jobs if they can grow. There are many business owners in this area who want to grow and who want to create jobs to the benefit of us all. That is why we need a new approach to bank lending and it’s why Labour’s plans for a network of regional banks are so important.