British Business Bank plans approved by European Commission

UK plans to set up a British Business Bank (BBB) have been approved by the European Commission, designed to oversee SME access to finance programmes in the UK, under EU state aid rules.

The Commission believed the concept would help address current market failures which hinder SME access to finance and would not distort the internal market.

The BBB will consist of three subsidiaries: the Mandated Arm, Service Arm and Commercial Arm, each providing distinct services to the small business community.

The bank will also develop and manage new SME access to finance programmes. It's felt that the BBB will provide a more efficient deployment of programmes to aid SME growth and subsequently contributing to economic development and job creation across the country.

The European Commission has enabled the Mandated Arm of the BBB to receive up to £6 billion of funding from the UK on a non-commercial basis until the end of 2019. This pot can supplement SMEs with access to finance where a market failure is demonstrated, either on commercial terms or on subsidised non-market terms.

However, if the Mandated Arm wishes to implement interventions outside the approved remit, it must notify the modification of its remit to the Commission.

The functions of the Service Arm, which will only offer advice and services to the UK Government and not the Commercial Arm, will be funded on a commercial basis and will onlycarry out market conform interventions involving state aid, and therefore not caught by EU state aid control.

Last updated: 17th October 2014