The British Business Bank, created to address market failure. Discuss.

Bank’s chief economist tells Rainmakers about the highs and low of its first decade

Hello Rainmakers

Sitting down and talking through big important strategic choices is a big part of what we set out to do with Rainmakers. So today’s piece with Matt Adey from the British Business Bank is really important for us.

"The British Business Bank was created in response to perceived market failure. Would a sign of success be that the bank got smaller rather than larger?"

By Alex Turner

I could tell from the initial reaction of the bank's chief economist, Matt Adey, that this question hadn't been part of his interview prep. But he rallied, and agreed. Well, sort of, with a yes-but-not-yet answer.

"I think in the long run, that would be the case," said Adey. "The bank, when it was started, was still subscale for the task, which is why we've grown it significantly.

"In the initial, largely nationwide schemes, a lot of that followed the existing market at some level. So it was easier to get more equity finance into places where there is already some equity finance. But over the years, we've changed that - equity in particular was highly concentrated in London and one or two other places.

"London will always be dominant and that's normal, but I think us growing, particularly outside of London and the immediate south east, is something that we've done, and it's been important. I don't think those markets are yet self-sustaining the right areas of the market.

"What we shouldn't do is we shouldn't become the market. We should be trying to develop the market in the right way, and developing it doesn't mean staying in it forever."

A DECADE OF IMPACT

Adey was talking to Rainmakers about the impact of British Business Bank's first decade, which had been analysed by an in-house report, Power of 10.