£4bn of capital for small firms

Alistair Darling has announced £4bn in money from the European Investment Bank to help small firms access credit over the next four years.

I wrote a few weeks ago about the economic justifications for this and those comments still stand. However, I'm surprised - and impressed - with how fast the government has moved. The money is apparently already available, through Barclays.

Barclays of course is one of the banks which did not require public capital earlier this month and so, arguably, was not subject to the condition of making funds available at 2007 levels - though it has strengthened its balance sheet with additional private equity.

Even before this announcement Barclays has certainly been making some credit available over the last couple of months without unusually onerous conditions. So if anything this could be a better than usual time for creditworthy businesses to raise funds. Not what you would expect given the headlines in the financial press.

Could this be, paradoxically, a real opportunity for small companies to invest and gain market share against bigger ones? The last major change in the economic environment - the dotcom boom - certainly provided some advantage to new and innovative firms.

If this money is used well, a new generation of young companies will grow up through the recession and position themselves as future powers of the economy. If 10,000 companies each borrow and invest £100k this year, expect at least three of them to be future members of the FTSE 100.

This single policy could go down, along with the independence of the Bank of England and the minimum wage, as one of the best economic decisions of the Blair and Brown governments. Does Peter Mandelson get the credit? Alistair Darling? Gordon Brown? I hope someone does, because the positive economic impact of this will far outweigh any negative effect of the much-criticised CGT and non-dom changes last year.


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