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Future of business lending 'could be local'

Date Added: 12/06/2012  

A local model could help to revolutionise the business lending sector if it is used in the UK, it has been claimed.

Germany already follows such a system and it is only a matter of time until it is trialled in this country, as many firms complain they do not have access to the loans they need from banks.

Hexham Conservative MP Guy Opperman is a supporter of the German business lending plan, which sees 70 per cent of all loans come from a local bank rather than a branch of a national corporation, reports BBC News.

"In most countries the lending is done by big superbanks, which are impersonal and dominated - in the UK - by a 'London knows best attitude'," he said, adding business lending in Germany is "done by local people to local people".

"It is a model that we would be well advised to take note of because we can replicate it here," the MP said, although it was pointed out there may be some problems using the system in the UK.

Many of Germany's local banks are co-operatives, which means they are partly run by local authorities, while British councils are currently embarking on a wide range of cuts to service in a bid to reduce public spending, which means it is unlikely they are about to begin starting banks.

But there may be other options the UK could take advantage of in a bid to change the current failing business lending model, with Jim Thomson, the postmaster in Prudhoe in Northumberland, suggesting Post Offices up and down the country could become banks.

"Post offices are trusted - we have more than 100 years of trust, whereas people do not trust the big banks anymore," he said, adding they know the local people and businesses.

Phil McCabe, spokesman for the Forum of Private Business, recently claimed some small firms in the UK could be forced to close down as a result of a lack of available business lending.

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Posted by Michael Beam

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