Examination of Witnesses (Questions 40-45)|
16 DECEMBER 2008
Q40 Roger Berry: Is there anything
else government can do, apart from trying to encourage that and
facilitate that, to address this credit insurance problem?
Mr Cave: I do not think I have
anything to add beyond what has been said on that.
Mr Frost: No.
Q41 Chairman: I would like to get
from you a sense of the urgency you attach to this issue. We are
having a very quiet and gentle discussion, but I met a manufacturer
in my constituency on Thursday of last week who faces desperate
difficulties because of this issuea perfectly viable business.
The credit insurers have decided that that type of structure of
company they just will not insure any more, for no good reason,
and it could be the end of the business. I just want to get a
sense of the urgency attached to this issue.
Mr Frost: I think the point is,
Chairman, that it is an issue but it is only one part of the jigsaw,
one part of the issues facing that business. As I said earlier,
there are difficulties clearly with the relationships with the
banks for many of these businessesdifferent on the credit
insurance. Of course they are then being squeezed by both customers
and suppliers and the cash is just draining out of the business.
It is an important aspect. As I say, we at the moment are surveying
exactly what is happening.
Q42 Chairman: For each business its
own particular challenge will be different. This particular business
has a strong cash flow, it has no other problems. Its only problem
is the loss of credit insurance. How widespread is that problem?
Mr Frost: I cannot give you a
response on the actual scale but it is a significant issue.
Q43 Roger Berry: Should the Government
step in and provide this facility? No doubt for a premium.
Mr Frost: My understanding is
the Government is examining this. If it is of a growing scale
and magnitude then I think the Government will have a role. Someone
will have to act as a guarantor, yes.
Mr Izza: I would be more inclined
to look to the market for solutions but if the market cannot find
solutions, well, perhaps it is a legitimate thing for the Government
to look at in these difficult times.
Roger Berry: That seems a wonderful summary
of where we are at the moment. The market has failed us in many
areas quite significantly and we are left to pick up the pieces.
Mr Binley: Except many might say regulation
has failed, quite frankly.
Q44 Chairman: We have run to the
end of the questions we wanted to ask you and we have a little
bit of time in hand. Is there anything you feel that you have
not said at sufficient length or anything that you would like
to qualify or add to the discussion?
Mr Cave: There is one thing I
would like to emphasise. We find ourselves in exceptional circumstances.
We need quick actions to get cash flow moving and to get access
to finance moving. The Government has responded to this. The £1
billion found that was in the PBR is a brilliant step in the right
direction, but it needs to be available soonnot at the
end of January, as we he have heard, it needs to be sooner. I
would say, in response to what was said earlier, let us put party
politics to one side and accept the fact that the principles around
that £1 billion fund are good, but it is not enough, so let
us broaden it out, and let us make sure that we help as many businesses,
viable businesses, as possible. Anything we can do to put pressure
on the Government to press for that would be wonderful.
Q45 Roger Berry: I entirely agree
with all of that. From your point of view, what is the obstacle
to accessing this £1 billion a little more quickly? I am
staggered at what seems to be the snail's pace of a lot of this,
given the nature of the problem. From your point of view, though,
why January? Why have things not happened already?
Mr Cave: It has been a real education
in how slowly government ministries and party organisations roll
compared to businesses on the frontline. With the greatest will
in the worldand certainly the officials we have spoken
to about this do want to get it moving quicklythere is
the Christmas period, et cetera, et cetera, and it all adds to
the delay. There is not as much realisation in Westminster about
how it is impacting in real time with our members on the ground.
In comparison, things move in slow motion.
Mr Frost: The point I would like
to make, Chairman, is that if we had been sitting here 12 months
ago it would have been a very different economic environment and
discussion that we would have been having. I do not think you
can discuss the relationship between banks and business without
overlaying it with what is happening in not only the UK economy
but the global economy fund as well. There is a marked downturn.
I do not want to appear an apologist for the banks, but certainly
lending decisions are going to be looked at in a very different
way now from what they were 12 months ago. If we are to get through
all of this, it is absolutely crucial that we maintain the good
quality businesses, the businesses that have a good track record
and that have potential, and then not let go. If that does not
happen, then I just cannot see us getting out of this very fast.
Mr Izza: Wherever you sit in UK
plc today, whether it is at the large end or the micro end, the
key issue is one of confidence. The solution is not in the hands
of any one particular groupI mean, the Government, the
banks, the insurers. Everybody has a role to play in bringing
this back. But one group which I think does have an important
role is the media. The media can often talk down the prospects
of British business, and, as David said earlier on, British business
is not a basket case across the board. There are some businesses
that will do very well in the forthcoming year and it will be
those who are the engines of growth for the future.
Mr Hoyle: Would it be fair to sayand
you have summed up quite wellthat it is good that the Government
has taken action. There may be more that needs to be done but
it is a lot better than doing nothing.
Chairman: That is a rather partisan observation
from Mr Hoyle. No one is suggesting doing nothing. We are all
discussing what is the right thing to do. On that note, I conclude