Recruitment industry financiers have welcomed today’s announcement of a new government-backed business bank, designed to lift the block on growth caused by the shortage of finance for firms that want to expand.

Speaking at Imperial College today, business secretary Vince Cable said the new bank was aimed at tackling the gap in “long-term, patient capital for business”.

Cable continued: “In the UK, such a bank could operate through alternative providers such as the new challenger banks like Handelsbanken, The Co-op and Aldermore, and non-bank lenders boosting their lending capacity as well as corralling existing provision such as co-investment and guarantees to support business expansion.”

Gary Edwards, head of the growth & acquisitions team at Investec Private Bank, says he welcomes the introduction of any new player into the market.

Edwards tells Recruiter: “There has to be an alternative to the existing big four/five banking model.”

Edwards says the new bank has an opportunity to be successful because the need is there, but that ultimately it will all “come down to delivery”.

Tristan Ramus, managing director of Hamilton Bradshaw and chairman of HCIG (Human Capital Investment Group), agrees that the new bank "could be helpful” for staffing companies. 

And particularly, he says if it can help provide them with between £1m and £2m in development capital on a five-year term, with interest rates a couple of basis points above Libor.

Libor is the interest rate at which banks lend to each other – the UK six-month Libor was 0.932% as Recruiter went to press – a couple of basis points above would be 0.952%

Ramus says that while the amounts the new bank lends don’t have to be vast, it could play a role “in squaring the circle”.

The areas where funding through the new bank could help are:

- buying a rival or helping a staffing company consolidate

- acquiring new staff

- moving to a new location or expanding internationally

- investment in new technology and processes

Ramus says it is important for the success of the new bank that the government allows the banks to get on with job and doesn’t try to run it through Whitehall. “Banks have the resources, knowledge and expertise to lend,” says Ramus.

Ann Swain, chief executive at the Association of Professional Staffing Companies (APSCo), tells Recruiter that the new bank will be of benefit to companies in the industry. However, she adds “the reality is that there needs to be the incentives for the existing banks to do business and to lend money out”.

A spokesperson for Barclays tells Recruiter: “Barclays are open for business. In 2012 we have delivered £20.5bn of gross new lending to UK households and business, a 5% increase on the previous six months. We believe it is the cheapest time for business to borrow in 25 years, which has been created by a combination of the low base rate environment and the Funding for Lending scheme.

“It is important that we be a responsible lender and have to ensure each loan meets acceptable risk limits otherwise it wouldn’t be appropriate for the borrower, nor the bank, nor society.”