One of the biggest barriers to putting up a building or growing a business is the up-front costs.  In this sense, the financial services sector plays a pivotal role in leveraging the capital required to get started.

Interest rates are at an all-time low, with little sign of an increase any time soon.  Yet some engineering businesses and their clients are still struggling to find loans that are affordable.  Without access to viable sources of credit, it is difficult for businesses to grow and projects to be developed without taking unreasonable levels of financial risk.

Lack of affordable lending also impacts on the housing market.  The inability to gain sensibly-judged, affordable mortgages reduces the incentive to build more homes and increases pressure on the private rental market.

It is clear that the implosion of the sub-prime market has led to a rethink of how financial risks are assessed.  However, reverting to a risk-averse approach to lending is not sustainable in the long term; certainly not if the reports that the UK needs another two million private sector jobs are to be believed.

The Government is intending to publish a green paper in the summer setting out proposals to get the financial system lending again.  Along with the recent proposals to establish a Green Investment Bank, this is to be welcomed as a step forward in the debate.

Yet any proposals that are put forward must be carefully thought out.  Poorly developed regulation could be difficult to implement.  At worst, it might result in more expensive credit – and business will be the worse for it.

Industry will be looking for sensible approaches that encourage responsible business growth and sustainable development.

Last 5 posts by Michael Hall

• Chancellor puts tax reform and “well-judged investment” on table with emergency Budget speech - June 22nd, 2010
• ACE reaction to today’s statement on local authority major transport schemes - June 10th, 2010
• ACE Conference 2010 asks: is "more for less" the theme of the new normality? - April 19th, 2010
• National Insurance: implications for industry - April 19th, 2010
• ACE Conference 2010 - looking to the long term? - April 14th, 2010