Plans to open a Bank of Birmingham
In what was intended as a clear show of support for local businesses, Coun Whitby was set to address the problem of financing small enterprises and called for support for struggling homeowners.
One of the available options was seeking partners to intervene in the local mortgage market to help bring stability.
He said the council was considering a proposal to purchase properties, machinery and business equipment for companies struggling to operate.
The council would buy physical assets and lease them back to firms.
The council’s plan flies in the face of council support for Private Finance Initiatives, in which businesses are contracted by the council to assist with local government work.
This ‘reverse-style PFI’ would provide the business with operating capital and security of tenure, while enabling the council to use the asset as security against which to increase prudential borrowing – a system which allows councils to borrow without the consent of government, as long as they remain within affordable borrowing limits.
John Lamb, of the Birmingham Chamber of Commerce, welcomed the proposals but said the council would need to look hard at the structure of the bank.
“In a way, it is good news. Anything that helps with the cashflow of businesses in difficult times is to be welcomed,” he said. “It’s certainly an area worth looking at. But I shall be interested to see how the council proposes to run this.
“Will they take on more staff? What will the costs be? It’s a bit ‘suck it and see’. I think perhaps it is very astute. Maybe with the market being flat, it is just the time to launch.”
