In his speech to the Labour Party conference in Liverpool on Monday, shadow chancellor John McDonnell said too many investment decisions are taken in London and proposed a £250bn National Investment Bank, which would be backed by a network of regional development banks to supply finance to regional and local economies.
“It’s a disgrace that our small businesses can’t get the finance they need to grow. Our financial system is letting them down badly. The new regional development banks will have a mandate to provide the patient, long-term investment they need,” he told delegates.
“It’s time for our regions and localities to take back control. So we will create new institutions, not run by the old elite circles.”
The FMB said it is vital that housing is not excluded from such investment in infrastructure. “Despite some improvements in recent years, too many SME housebuilders struggle to secure finance on affordable terms. If these firms can’t borrow, they can’t build. Businesses are often understandably sceptical of Government intervention, but this is one area where it would almost certainly be welcomed,” said chief executive Brian Berry.
He called on McDonnell to revisit ideas such as the Help to Build policy of guarantees on private loans to SME house builders endorsed by the Lyons review and contained in the last Labour manifesto.
“The idea of well-funded regional development banks could also have a real part to play in an improved financial offer to the SME house building sector. By improving access to finance for SME builders we can generate sustainable locally-based growth, skilled long-term employment and go a long way to achieving the increased supply of new homes which all sides agree we need to build,” added Berry.
However, online mortgage lender LendInvest cautioned against one-dimensional solutions. Steve Larkin, director of development finance, said more support from Government is needed to create a diverse market with a variety of building firms delivering different types of homes, but added that issues such as access to land are important as well.
“Addressing the lack of access to funding is one obvious way, but fixing this problem will take a more nuanced approach than simply throwing money at it. SME builders need better access to land on which to build, and help in building the skillset they need in order to make a success of their projects too,” he said.