Original URL: http://www.theregister.co.uk/2009/01/13/bcc_mandy/

Mandy flies flag for small biz bailout

Good money after bad

By John Oates

Posted in Small Biz, 13th January 2009 12:29 GMT

On the day the British Chamber of Commerce described economic figures for the fourth quarter as "truly awful... unprecedented... no positive features", Lord Mandelson's Department for Business, Enterprise and Regulatory Reform was busy leaking plans for a £20bn guarantee for small business loans in another attempt to free up credit for businesses.

We're sure the original bank bailout was supposed to guarantee just that kind of lending, but hey, we're not highly-paid economists.

The scheme would guarantee loans, for a fee, made by banks to businesses with less than 50 employees. Of course this would lumber taxpayers with even greater levels of debt should a large number of these firms fail or otherwise default on their debt. Digger maker JCB blamed the difficulty its customers were having in getting credit for job cuts it announced today.

The BCC's fourth quarter economic survey of 6,000 businesses was the worst since it started doing the research in 1989. The BCC said: "There are no positive features in the Q4 results. Domestic demand is plunging, exports are falling, and confidence is plummeting. All the critical national balances have worsened in Q4, for both manufacturing and services, and all are in negative territory."

The BCC said it was clear the UK is facing a serious recession and the downturn is deepening. It called for a national recovery plan to get the economy moving again. None of this sounds to us like good reason for banks to start lending money to businesses again.

Berr had nothing more to say on the apparent loan deal, but predicted more news later this week.

The Tory Party claimed Mandy was pinching its ideas, but that it would blow £50bn on the bailout.

The LibDems however condemned the move as another example of the taxpayer taking all the risks for bankers with no reward.

Vince Cable, LibDems' shadow chancellor, said: "The simple and obvious issue which has to be raised is why the partially-nationalised banks are not being required by the Government to maintain the flows of lending... the Government seems to lack the bottle to break the banks' lending strike. It finds it much easier to use taxpayer-financed guarantees than to get tough on the taxpayers' behalf."

Cable called for full government control of the partly-nationalised banks.

Forrester Research predicts spending on IT kit and services will fall three per cent this year in US dollar terms. It reckons software sales will do slightly better than other categories - they will stay the same as in 2008. ®