Big businesses can tap the stock market for money. Small businesses can scrape by on their overdrafts. Between the two, a gap yawns. It needs bridging.
It was first spotted some 80 years ago, when the economy was, as now, in a deep hole, and the government, as governments do, responded by setting up a committee of inquiry, to be chaired by a judge. This was Lord Macmillan, who wisely let John Maynard Keynes draft most of his report, but gave his name to its most important finding: the Macmillan gap.
Better still — though only after a long pause for thought — the bridge-builders were set to work. The Bank of England rounded up the High Street banks, and together they funded a new entity, soberly called the Industrial and Commercial Finance Corporation. Its customers were the middle-size businesses caught in the gap. Typically, ICFC would put capital into them, or lend to them, or, probably, do both.
With offices up and down the country, ICFC knew its markets and was no soft touch. It could not afford to be. Its disciplines were salutary. It was respected and effective, but over time it lost its distinctive purpose. A process of merger and rebranding saw it disappear into 3i: not a typographical error, but some badge engineer’s bright idea. The banks took their money out. These days 3i is a venture capital company with more than its fair share of misadventures.
So here we are, back in our hole, and the preferred way out, wished on us by advisers and committees, is to get the banks to lend more money. The Business Secretary, Vince Cable, even talks in terms of setting up a business bank — just the place for the other banks to unload their shakier customers. There are limits to any business’s ability to get by on borrowed money. To survive and to thrive it will need capital.
Cable should reflect that Keynes and Lord Macmillan were right all those years ago.
It is time now for the Vince and Mervyn Show — for a new entity, sponsored as before by the Bank of England, to take up the work for which ICFC was designed. As before, it would get out to its customers and know its markets. As before, it would be no soft touch. It would not need to be. Bridge that gap!