Essex CC’s much-vaunted bank, established to provide loans to small businesses in the county, has become the latest victim of budgets cuts.
The Banking on Essex venture, which cost £386,000 to set up, will be wound down next month due to financial pressure facing the public sector, the council said.
Hailed by the council as the first major municipal banking scheme to be created since 1915 when it opened in April 2009, it was only able to hand out around half a million pounds worth of loans, despite launching with a £30m war chest to help recession-hit businesses. On it’s launch the bank was singled out by David Cameron as a beacon of good practice in Conservative-led local government.
The council insisted the bank, set up in partnership with Santander Corporate Banking, had provided critical support for businesses and helped them weather the recession.
The council said it needed to make £98m of cuts and take a further £30m out of reserves to ease pressures on services and balance its £2.1bn budget for the coming financial year.
Council leader Peter Martin (Con) said: “Due to the financial challenges facing the public sector, some difficult budgetary decisions have had to be made.
“As a result, I have announced today the council’s intention to close the initiative, a mutual decision reached by both the council and its partner Santander Corporate Banking.
“We are working with Santander to ensure that all Banking on Essex customers are kept fully informed of the decision process – and for them, its business as usual.
Santander regional manager, Lindsey Rix, said: “We would like to reassure all Banking on Essex customers that Santander Corporate Banking remains committed to them and their businesses.
“We will continue to support Banking on Essex customers along with other small and medium sized companies as part of our ongoing commitment to businesses throughout the region. Should customers have any queries regarding their accounts, they should contact their local Relationship Director.”
As LGC revealed last June, over the bank’s first six months it approved only 10 loan applications totalling £290,000. At the time Tom Smith-Hughes, leader of the council’s Liberal Democrat group, said the performance was “disappointing”.
Cllr Smith-Hughes said local businesses were driven away by the insistence by Santander that businesses wanting a loan through Banking on Essex must transfer all their banking facilities to Santander.
At the time Essex CC insisted the sluggish start was due to teething difficulties.