Government money will boost businesses

A FRESH government bid to shore up the banking sector is likely to mean a business boost for Ipswich firms, town leaders predicted today.

As part of a £37bn rescue package the Royal Bank of Scotland will receive £20bn of taxpayers' money with a further £17bn to be put into HBOS and Lloyds TSB.

The deal will see banks guarantee to increase business lending and provision of new mortgages.

Paul Winter, chief executive of Ipswich Building Society, said many businesses are facing cashflow problems as a result of the credit crunch and the unwillingness of banks to lend.

He said the government bailout will go someway to changing that situation.

Mr Winter said: “If the package works and it stabilises the financial system it is going to be good for everyone.

“We rely on the banking system to keep the economy going.

“One of the conditions of the whole package is that banks make much more loans available both to potential house buyers and to businesses so they should see a benefit.

“A lot of businesses that rely heavily on bank borrowings have found it much more difficult and the cost of borrowing has gone up which clearly has an impact on profitability.”

Paul Clement, director of Ipswich Central, agreed that the government move is good news for firms in the town.

He said: “Restoring confidence among the banks will mean businesses in Ipswich can borrow money and consumers may have more confidence.

“I think more will be required but it is a very positive step.

“It isn't entirely about a UK solution though, it's about a global solution and getting governments in Europe and the US to follow it.

“Security for our financial institutions could be the shot of confidence that business needs.”

n. Has your business suffered as a result of the credit crunch and global economic turmoil? Write to Your Letters, Evening Star, 30 Lower Brook Street, Ipswich, IP4 1AN or e-mail eveningstarletters@eveningstar.co.uk