Press Releases

November 2011

Listen out for small firm credit details in Autumn Statement, advises Milsted Langdon consultant economist

South West-based chartered accountancy firm Milsted Langdon’s Consultant Economist is advising small and medium-sized business owners to pay close attention to Chancellor George Osborne’s Autumn Statement later this month for details of how the lack of credit available to the sector could be addressed.

Mr Osborne hinted during the recent Conservative Party conference that a bond arrangement for smaller firms was one of the possible options being looked at by the Treasury, which is currently working on a ‘credit easing’ scheme to inject money directly into parts of the economy which require it. The measure was specifically targeted at SMEs.

Although the Chancellor gave very little detail, it is thought that the idea would involve  corporate bonds issued by smaller firms, with a repayment guarantee or re-financing commitment improving the attractiveness of such instruments to investors.

The scheme, if it went ahead, could increase the scope and depth of the UK’s corporate funding market, as well as offering a partial solution to the problems many SMEs face obtaining credit.

Kevin Butler, until last December the Bank of England’s Agent for the South West and now Consultant Economist at Milsted Langdon, said it was likely that further details of such a scheme would be given more flesh, when Mr Osborne gives his Autumn Statement on 29 November in response to the Office for Budget Responsibility’s update of its growth forecasts.

He said: “George Osborne didn’t give away much detail at all at the conference; he just dropped it into his speech to tease Tory supporters. However, he seemed to be implying that bond arrangements – under which large firms are able to sell their debt direct to investors – could be introduced for SMEs, who are currently unable to issue their own corporate bonds because of the way these bonds are rated for creditworthiness.

“Bank credit in its various forms is likely to remain the main source of funding for smaller firms. But there are other options for easing the supply of credit, including, further refinements to the old Load Guarantee Scheme for smaller firms, refinancing existing bank debt, perhaps with the Government as guarantor, or by setting up a new institution. I personally quite like the idea of a specialised institution for lending to smaller firms. But in an era of tight public funding, taxpayers’ money would have to be used sparingly – perhaps with a focus on business investment in innovation and training.

“Of course, even if these facilities were available, would business owners necessarily be rushing out to take advantage? The message we are hearing from those who attend our Business Club is that firms are still very cautious about investing at the moment because of the uncertain market conditions.

“However, what we have been trying to get across in our Business Club is that, even though the economy remains difficult, there are still good opportunities out there for well-run and innovative businesses. If an idea such as corporate bonds helps SMEs to make positive business investment decisions, then that can only be a good thing.

“I will be paying close attention to Mr Osborne’s Autumn Statement at the end of the month to see what further details he reveals.”

For more information about Milsted Langdon, contact the Taunton Office on 01823 445566, the Bristol Office on 0117 945 2500, or the Yeovil Office on 01935 383500.