One of the biggest challenges is getting access to ready money – as entrepreneurs know, one needs to spend a bit of money to make money. And it is the lack of access to credit that is affordable that is holding businesses back.
But the Funding for Lending scheme has not had the desired effect. Banks – though not building societies – are holding on to their capital before getting back into the market again. This might have the short-term effect of building up their balance sheets, but it is doing nothing for the wider economy as these same institutions are not serving the function on which many companies rely.
Perhaps our regulators and politicians need to think more imaginatively about access to finance. If the banks will not lend, what about the insurance sector?
One aspect that is often overlooked is the amount of money stored up by the insurance companies, and the fact they have to put this to good use for their annuity policy holders. With gilts and corporate bonds showing poor returns, property development has become a more enticing prospect for providers.
Legal & General has tried this area, and it sounds appealing. It has developed a number of retail sites, using its capital in a manner in which it is needed. With reputable tenants on long leases, this sounds like a good idea that could get other developments needing capital to get off the ground – and the policyholder gets a sensible return for his money too. Sometimes just a little imagination is all that is needed.