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Beyond the Banks: The case for a British Industry and Enterprise Bond

This research summary makes the case for specific kinds of credit easing measures to be introduced.

This research summary makes the case for specific kinds of credit easing measures to be introduced.

Key findings:

  • This report proposes that the Government buy up banks’ loan portfolios and finance these by issuing securities – a British Industry and Enterprise Bond – to investors. Our research suggests there is considerable investor appetite for these bonds.
  • This would increase lending to small businesses, by freeing up banks’ balance sheets. It would also help address the UK financial system’s dependence on a relatively small number of banks and the relatively small size of non-bank lending options.
  • The Bond would increase the diversity of the UK lending market, and would provide a basis for new providers to enter the market.
  • Further recommendations for the Government include that it should level the playing field for start-ups that provide small business credit, currently unable to avail themselves of much of the government support open to other start-ups; and that it set in motion a review of the taxation of debt finance, which tips the scales in favour of debt rather than equity.

Economic recovery and growth relies on investment by UK businesses. But levels of bank lending remain stubbornly low, and may fall further as the Eurozone crisis deepens. In October 2011, the Chancellor of the Exchequer announced that the Government would begin a policy of credit easing to improve small businesses' access to finance.


The issue of credit easing has been widely discussed by macroeconomists and large banks. This report offers a different perspective, drawing on the insights of the entrepreneurial businesses that rely on finance to grow and the new providers of credit who are attempting to improve the system.


Our central recommendation is that the right kind of credit easing measures can bring new sources of capital to invest in small businesses.


Stian Westlake, Sam Gyimah MP and Marco Zappalorto


Stian Westlake

Stian Westlake

Stian Westlake

Executive Director of Policy and Research

Stian led Nesta's Policy and Research team. His research interests included the measurement of innovation and its effects on productivity, the role of high-growth businesses in the eco…

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Marco Zappalorto

Marco is Head of European Development and he is currently developing a coherent European strategy for Nesta to expand the organisation's European reach and core partnerships.  Prior to…