Cautious welcome for Brown’s £20bn bail out

The Food and Drink Federation (FDF) has cautiously welcomed the government’s promise to guarantee £20bn of loans to struggling companies, but...

The Food and Drink Federation (FDF) has cautiously welcomed the government’s promise to guarantee £20bn of loans to struggling companies, but warned that it might not be enough.

The FDF said its members had been finding it difficult to secure finance given the current restrictions on lending. “Smaller members need the support of available guarantees to enable them to overcome current cash flow issues and the lack of credit insurance, while some larger companies could benefit as they look to expand through acquisition,” said an FDF spokeswoman.

The FDF was responding to a package of measures to address the cash flow, credit and investment needs of businesses by securing bank lending, unveiled by business secretary Peter Mandelson.

The government’s measures include a £10bn Working Capital Scheme - securing up to £20bn of short-term bank lending to companies with a turnover of up to £500M; an Enterprise Finance Guarantee Scheme - securing up to £1.3bn of additional bank loans to small firms with a turnover of up to £25M. And a £75M Capital for Enterprise Fund (£50M from government and £25M from the banks) to invest in small businesses which need equity.

Phil Orford, chief executive of Forum of Private Business, added: “This package is certainly welcome and is likely to address some of the credit restrictions that our members are facing. However, it must be followed up by longer-term measures to support small businesses and stimulate the economy, including tax cuts and similar strategies.”

The government has launched a web portal on its Business Link website to help businesses ascertain their eligibility for a range of government support.