A leading think tank has made the case for a massive shake-up of the UK\u2019s banking system, arguing that a new network of regional banks should be established nationwide.<\/p>\n
Demos said the changes would allow branches to operate which had a specific remit to support growth in their local economy.<\/p>\n
The Community Chest report concluded that a new system is necessary because of the challenges that SMEs encounter when trying to access finance.<\/p>\n
To make matters worse, the difficulties vary greatly depending on where a business is based.<\/p>\n
In the poorer parts of the UK, SMEs are more likely to be rejected for loans and have to pump their own money into companies.<\/p>\n
There are particular challenges for firms trying to secure funding in Yorkshire and the Humber, the North East and the North West.<\/p>\n
Demos believes that part of the problem is that larger banks tend to resist lending because they are keen to maximise returns for their shareholders and it is difficult to do this by investing in SMEs.<\/p>\n
The solution, the think tank believes, is to follow the model that has proven successful in other parts of Europe and make provision for a string of smaller banks with a \u201ccivic mission\u201d to help fledgling ventures.<\/p>\n
Duncan O\u2019Leary, Demos\u2019 research director, said that this strategy could pay dividends and may go some way to tackling the north\/south divide which often bedevils economic growth.<\/p>\n
\u201cIn countries such as Germany, banks come in a range of shapes and sizes, with local banks working alongside multinational, commercial organisations,\u201d he said.<\/p>\n
\u201cAs Britain seeks to rebalance its economy, with higher business investment and more even growth across the country, it is a model we should learn from.<\/p>\n
\u201cThe British Business Bank already seeks to improve credit conditions for Britain’s businesses: it could be the parent of a network of local banks in the UK.\u201d<\/p>\n
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