Firms in abandoned calls inquiry

7 July 2011 Last updated at 13:42 GMT The fines for making silent or abandoned calls have recently been increased Npower and Homeserve are facing investigations by the communications regulator for making abandoned calls.

The energy company and home maintenance firm, which have nine million customers between them, have been accused by Ofcom of "persistent misuse" of communications equipment.

These calls often occur when firms dial several numbers at once but then fail to have a staff member lined up to speak when a call is answered.

Both firms said cases were infrequent.

Warning

Call centres use automated dialling equipment to make dozens of calls at once, but these brought thousands of complaints from people who received repeated silent or abandoned calls when staff were unavailable.

Continue reading the main story

Call centres use automatic diallers to contact large numbers of people.

When the call is answered, the recipient is put through to an operator.

But the person at home can find there is nobody on the line if there are not enough staff at the call centre to actually speak to them.

Silent calls leave the line empty, but abandoned calls play a recorded message.

Although the use of automated systems will not be banned, companies have been told by Ofcom to employ such practices more carefully.

In February, the maximum fine for regularly making these silent or abandoned calls was raised to ?2m.

Now Ofcom has said it has reasonable grounds to believe that Npower and Homeserve had broken the rules.

It believed that both had "persistently misused an electronic communications network or services by virtue of its use of an automated calling system" between 1 February and 21 March.

Response

Ofcom suggested that Homeserve repeatedly called people within a 24 hour period and that Npower played recorded marketing messages if nobody from the call centre came on the line.

Both companies have until 10 August to make their case to Ofcom.

Homeserve, which provides emergency plumbing and boiler repairs, admitted to the BBC that it had been in breach of the regulations for a very short period.

"Homeserve confirms that this limit was exceeded by a single outsourced supplier. This fact was uncovered by our own internal audit processes, and was remedied immediately upon discovery," a spokeswoman said.

It said its systems were now fully compliant.

A spokeswoman for Npower said: "Our average abandoned call rate is consistently below Ofcom's 3% rule. Their concerns only relate to a few random individual days where we have exceeded this level."

Barclaycard received the biggest penalty allowed under the old rules of ?50,000 in September 2008.

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Bribery Act targets corrupt firms

30 June 2011 Last updated at 23:15 GMT Companies prosecuted by the SFO must show they have adequate procedures in place to stop bribes Legislation aimed at making it easier to prosecute companies who make corrupt payments abroad has come into force.

The Bribery Act overhauls existing laws dating back to 1889 and creates offences that carry prison terms of up to 10 years and unlimited fines.

It makes it illegal to offer or receive bribes and to fail to prevent bribery.

Both British and foreign companies are covered, provided they have some operations in the UK. The act also applies to individuals.

The government says the act will cement the UK's position as a global leader in the fight against business corruption.

Corporate hospitality

The legislation was due to come into force in April 2011, but it was delayed over business concerns about whether corporate hospitality could be seen as a bribe.

Continue reading the main story Clive Coleman Legal correspondent, BBC News

It was the halting, in late 2006, of the Serious Fraud Office investigation into alleged bribery payments greasing the Al Yamamah arms deal between the UK and Saudi Arabia which focused the need to reform the UK's antiquated bribery laws.

The Organisation for Economic Co-operation and Development was critical, especially as the UK had signed up to its anti-bribery convention in the late 1990's. Prosecutions of companies were all but unheard of, and to prove a case prosecutors had to show that the bribery on the ground was perpetrated by a "controlling mind" of the company ie: someone high up. That was difficult

The new act creates offences of offering or receiving bribes, and a tough new offence of "failing to prevent bribery". If a company is prosecuted for that, its only defence is if it can show it has "adequate procedures" in place to stop bribes. That will involve new policies, training and cost.

Government guidance says that corporate hospitality that is reasonable and proportionate, will not be seen as a bribe.

As a result, the government issued additional guidance on the act.

In its guide to the Bribery Act, the Ministry of Justice says: "Very generally, [bribery] is defined as giving someone a financial or other advantage to encourage that person to perform their functions or activities improperly or to reward that person for having already done so."

In March Justice Secretary Kenneth Clarke assured companies the act would be implemented in a "workable, common sense" way.

He has since assured companies that they can take clients to events such as Wimbledon and the Grand Prix, so long as the hospitality is reasonable and proportionate.

The government said it did not expect "genuine hospitality" or similar expenditure to fall under the act.

Companies prosecuted under the act must show they have "adequate procedures" in place to stop bribes.

"Adequate procedures" may include providing anti-bribery training to staff, carrying out risk assessments for the markets being operated in, or carrying out due diligence on the people being dealt with.

A survey released in June 2011 by the consultants KPMG suggests that a third of UK companies have not yet conducted an anti-bribery and corruption risk assessment.

The survey also found that 71% of companies believed there are some places in the world where business cannot be done without engaging in bribery and corruption.

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Go for British staff, firms urged

1 July 2011 Last updated at 15:58 GMT Iain Duncan Smith: "We have to ensure that our immigration system works in the interests of Britain"

Work and Pensions Secretary Iain Duncan Smith has urged UK businesses to "give a chance" to unemployed young Britons, rather than relying on foreign workers.

In a speech in Spain he said a "realistic promise" of work formed part of the government's "contract" with the British people.

Business groups said firms needed the "best people" and migrants often had a better work ethic and skills.

And Labour said what was needed was "proper action" rather than talk.

Under European Union labour laws, most EU citizens can work in the UK without restriction.

The government has introduced a cap on the number of skilled workers from outside the EU, in an effort to reduce net migration from about 200,000 a year to the "tens of thousands".

In a speech to the Spanish Foundation for Analysis and Social Studies in Madrid, Mr Duncan Smith said that more than half of newly filled jobs in the last year were taken by foreign nationals.

'Vulnerable group'

He warned that there is a "serious risk" that British people will not benefit as the economy recovers if firms "look elsewhere" for workers.

"If we do not get this right then we risk leaving more British citizens out of work, and the most vulnerable group who will be the most affected are young people," he said.

Continue reading the main story Most citizens of EU countries, as well as Switzerland, face no restrictions on working in the UKBulgarian and Romanian nationals need authorisation to work, with some exceptionsBritish firms are not allowed to discriminate against non-UK nationals from the EU over terms of employment, pay and working conditionsThere is a 21,700 annual cap on the number of skilled non-EU workers allowed into UKA points-based system is used to determine which skilled non-EU workers can enter UKThe cap excludes employees transferred by companies from abroad "But government cannot do it all. As we work hard to break welfare dependency and get young people ready for the labour market, we need businesses to give them a chance, and not just fall back on labour from abroad."

He said that while immigration played a "vital role" in helping bridge skills gaps, there were many foreign nationals in low-skilled or semi-skilled jobs that could easily be done by unemployed Britons.

"We have to ensure that our immigration system works in the interests of Britain, enabling us to make a realistic promise to our young school leavers," he said.

He said the immigration system must give unemployed people "a level playing field."

In 2007, then Prime Minister Gordon Brown pledged to create "British jobs for British workers" - but the Conservatives said that was illegal under EU law. Official figures suggested that most of the new jobs created since 1997 had gone to people who were not born in the UK.

The unemployment rate among 16 to 24-year-olds fell by 79,000 to 895,000 in the three months to this April but youth unemployment rates still stand at above 19%.

Labour say, after a year in his job, Mr Duncan Smith "should stop talking and start delivering".

'Great tragedy' Continue reading the main story

I do not think it is the role of employers to discriminate on that basis, it is the role of employers to take on the best person for the job”

End Quote Andrew Cave Federation of Small Businesses Shadow work and pensions secretary Liam Byrne told the BBC his party would increase taxes on bank bonuses to help pay for new work opportunities for 60,000 young people and reverse cuts to Border Agency staff which he said created the conditions for "illegal immigration to flourish".

"There are simply not enough jobs because the government is cutting back too far and too fast," he added.

"The great tragedy of all of this is that young people lose the habits of work and we as taxpayers have to pick up the bill."

Mr Duncan Smith was backed by Migrationwatch chairman Sir Andrew Green, who said he was "absolutely right".

"Employers have a responsibility to give young British workers a chance and the government must get a grip of immigration if they are to avoid abandoning a whole generation of young Britons on the dole."

'Glib'

But Andrew Cave, from the Federation of Small Businesses, told the BBC it was "quite a glib, throwaway political comment" from the minister.

He said for decades governments had removed links between the education system and business - and school leavers often did not have the skills or training needed.

"If you are an EU citizen you have a right to work here. If an employer discriminates against somebody on the basis of their nationality, and they are from within the EU, they could end up in legal deep water.

He added: "I do not think it is the role of employers to discriminate on that basis, it is the role of employers to take on the best person for the job."

Director General of the British Chambers of Commerce, David Frost, told BBC Radio 4's Today programme that employers needed the "best people".

"They expect young people to come forward to them who are able to read, write, communicate and have a strong work ethic and too often that's not the case," he said.

And Habib Rahman, of the Joint Council for the Welfare of Immigrants, said Mr Duncan Smith was issuing "a disingenuous and populist call for tighter immigration laws, when his perceived problem is from an area the UK government is powerless to affect - EU immigration."

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Mobile firms can trade spectrum

21 June 2011 Last updated at 10:08 GMT There are now 12.8 million smartphones in the UK according to Ofcom. UK regulator Ofcom has given phone operators the green light to trade spectrum in a move intended to increase mobile network capacity.

Available bandwidth is becoming a huge issue as smartphones put increasing demand on networks.

The trading of airwaves comes ahead of a crucial spectrum auction next year that will usher in 4G data services.

Both the auction and the decision to allow operators to trade existing spectrum have caused controversy.

Spectrum trading allows operators to sell off the airwaves they own in the 900MHz, 1800MHz and 2100MHz frequency bands.

Historically the 900MHz slice of spectrum has belonged exclusively to O2 and Vodafone because they were the only two mobile operators on the market when it was handed out.

While other nations have reallocated this spectrum to offer a more level-playing field ahead of 4G auctions, this has not happened in the UK.

Ofcom had originally planned to redistribute the spectrum allocated to O2 and Vodafone, but was met with a legal action, initiated by the two operators.

Lifeblood

Ofcom dropped its plans following the merger of T-Mobile and Orange.

Everything Everywhere (EE), the parent company of T-Mobile and Orange will be the biggest beneficiary of spectrum trading.

It was required to sell off about 19 percent of its spectrum frequencies as a condition of the merger.

Three is unhappy as it has the least spectrum to trade.

"Spectrum is the lifeblood of smartphones and the mobile internet and for those with surplus holdings it is also a strategic asset, so voluntary trading is the exception," it said in a statement.

"This move simply allows those who have been gifted access to public spectrum to profit from it, with no benefit for UK taxpayers."

Three will voice its concerns later today at a Department of Culture select committee hearing set up to discuss the way spectrum is being allocated.

Further delays

O2 and Vodafone are unlikely to sell off any of their assets, according to Matthew Howett, an analyst with research firm Ovum.

"It is simply too valuable to them and they would only trade it if they were forced to," he said.

What may force their hand is the upcoming 4G auction in which Ofcom has set caps on the amount that can be bought.

It will mean the operators with more existing spectrum will be able to buy less of the more valuable 4G airwaves.

Ofcom has also ring-fenced some of the spectrum for new entrants such as Three.

"It has done this because it recognised that 3 might not be able to survive and it values the disruptive nature of a player like 3," said Mr Howett.

But O2 said it was tantamount to "state aid" and has threatened legal action.

Any further delays to the auction could put the UK behind other European countries in the roll-out of 4G services, said Mr Howett.

4G will be crucial as the market continues to grow.

According to Ofcom there are now 80 million mobiles in the UK, 12.8 million of which are smartphones.

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Japan car firms hire to up output

21 June 2011 Last updated at 06:17 GMT Japanese car makers have been suffering a shortage of parts and therefore operating at reduced capacity Japanese car firms will boost production by hiring thousands of contract workers in the aftermath of the March earthquake and tsunami.

Toyota Motors has said it will take on up to 4,000 workers starting in July, after a plunge in Japanese production of almost 75% in April.

Honda said it will hire about 1,000 contract workers and Nissan about 200.

Japan's car makers have been facing supply chain disruptions and power shortage problems since the disaster.

Toyota said that in Japan it will be back to 90% pre-earthquake production levels in June and close to 100% from July onwards.

"By July we'll be back at monthly production levels. But we still have to make up for those units we lost over the last couple of months," said Toyota spokesman Dion Corbett.

"This [hiring] drive is primarily to make up for lost production."

The sentiment is echoed by the other car makers.

Honda, which also saw a dive in production after the earthquake, said it was hiring on 3-months contracts.

"When production went down to 50% we had stopped some contracts for some temporary workers. Therefore to increase production, we are increasing hiring," said spokesperson Akiko Itoga.

The 9.0 magnitude earthquake and subsequent tsunami destroyed entire towns and disrupted electricity-generating facilities, including the Fukushima nuclear power plant.

This led Japanese car firms to announce production disruptions, both domestically and overseas, because of plant closures and slowing output.

Toyota forecasts it will suffer 450,000 units of lost production this fiscal year which ends on March 31, 2012, according to Mr Corbett.

Approximately 220,000 units of Toyota and Lexus production were lost globally between March 11 through to the end of that month.

Therefore. the global impact of the earthquake on Toyota is approximately 670,000 units.

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Wealth management firms warned

14 June 2011 Last updated at 14:33 GMT The regulator is worried that client money is at risk from sloppy investment practices Firms that manage investments for rich people have been warned they are failing to invest client money properly.

The Financial Services Authority (FSA) has found evidence that many "wealth management" firms may be exposing their customers to too much risk.

The regulator has written to 260 firms, telling them to ensure their clients' investment portfolios are suitable.

The FSA said a recent review had found "significant, widespread failings".

"We have recently reviewed the suitability of client portfolios in a sample of firms in the wealth management industry," the FSA said in a letter to the chief executives of the registered firms.

"We have identified significant, widespread failings, which we are concerned may also be prevalent in firms outside our sample."

Some of the firms are divisions of big banks and some are independent businesses.

The letter is a warning to the industry to get its house in order.

The FSA looked at a selection of 16 firms to see if the clients' investment portfolios had been managed in line with their "knowledge and experience, financial situation and investment objectives".

The review of records at 16 firms found that:

14 had exposed their customers to high, or medium-high, risk of loss, because of unsuitable investments, or investments whose suitability it was not possible to judgeof the client files examined, 79% had a "high risk of unsuitability", or the suitability could not be decidedof the files examined, 67% of the investments were not in line with either the firm's own investment model, the client's willingness to accept risky investments, or the client's own investment aims.

The firms that were scrutinised are being followed up by the FSA and some have put in place plans to bring their customers' portfolios back in line.

The FSA said it was especially worried about poor record keeping at the wealth management firms, which meant they did not have basic know-your-client information, or records of the personal financial situations of their clients.

It had also found that investment portfolios did not match the clients' stated willingness to take risk, or to their personal investment objectives.

"These findings give rise to concerns that there is an unacceptable risk of customers of wealth management firms experiencing unfavourable outcomes," the FSA said.

The Financial Ombudsman Service (FOS) said it had received 1,148 complaints about portfolio management in 2010-11, which was 10% more than in the previous year.

About two-thirds of those complaints are currently being decided in favour of the complainant.

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Debt firms 'face stricter rules'

14 June 2011 Last updated at 12:30 GMT The advice given by some firms was unacceptable, the OFT found Firms offering debt management services to people in financial difficulty will have to abide by much stricter rules or face being closed down.

The Office of Fair Trading (OFT) is consulting on the new rules to make such firms treat their clients fairly.

They will have to make it absolutely clear what services they offer and how much they will charge.

The firms must not use misleading names or adverts, and the advice given must be in the client's best interests.

David Fisher, a director of the OFT, said: "This guidance is designed to leave firms in no doubt about the standards the OFT expects and what they must do to comply with the law."

"The failings identified by our recent review are unacceptable and show that debt management businesses must raise their standards or face enforcement action," he added.

Poor practice

In September 2010, after an 11-month investigation, the OFT threatened to close down 129 firms, and said the industry was blighted by misleading advertising and poor advice to those in debt.

Continue reading the main story Simon Gompertz Personal finance correspondent, BBC News

How can you justify an industry which includes cases of hoodwinking heavily-indebted families into parting with their last reserves of cash?

The Office of Fair Trading goes into shocking detail about the tactics used by some debt management firms.

They fool people into thinking they are charities, trick them into paying extra fees and even make customers use premium rate phone lines to keep track of events.

The better firms have grouped together in trade associations with acceptable codes of conduct, to differentiate themselves from rogue operators.

Meanwhile, the OFT has been shutting down suspect firms when it can.

The aim is to fashion a new-look debt management sector with the next year or two. But it could be hard to banish the rip-off merchants completely.

"Firms are not giving the advice or offering the solution that is in the best interests of the consumer, but instead that which is most profitable to them," it said.

The OFT was referring to the widespread practice of charging fees up front for organising plans such as individual voluntary arrangements (IVAs).

Some firms pretended their services were free, gave fundamentally poor advice to clients, or pretended to be charities or government bodies. the OFT found.

Since then, 43 businesses have given up their consumer credit licences which allow them to operate, and 11 more face action to have their licences taken away.

Last month, the BBC revealed that some firms had held onto their clients' cash, rather than use it to pay creditors immediately, exposing the clients to further losses if the debt management firm went bust.

The Money Advice Trust welcomed the OFT's plans.

"Debt management companies have time and again demonstrated they cannot be trusted to treat customers fairly of their own accord," said Joanna Elson OBE, chief executive of the trust.

"In many cases there is a clear conflict of interest between what generates a profit for the company and what is the best course of action for the individual in debt," she said.

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Debt management firms retain cash

26 May 2011 Last updated at 23:01 GMT By Simon Gompertz Personal finance correspondent, BBC News Nina and Ged Murphy believe they will lose their home

Some debt management companies have been holding on to clients' cash rather than paying it to creditors, a BBC investigation has found.

The practice has left heavily-indebted families thousands of pounds worse off.

The Office of Fair Trading (OFT) has condemned the practice as "totally unacceptable" and has promised a crackdown.

One senior figure in the debt management industry says 10,000 people could be in danger from the practice.

If a firm goes out of business and client funds are not kept in a protected account, some or all of the money is likely to be lost.

Horror

Nina and Ged Murphy told BBC News that they had had to put their house on the market and could face repossession. They say it was the result of responding to a cold-call from a debt company.

The firm, Global Debt Solutions, which is based in Bolton, offered to arrange a repayment plan for ?40,000 of credit card debt and loans.

The debt had mounted up after Mr Murphy lost his job and Mrs Murphy had a spell in hospital.

Andrew Smith from ClearDebt fears thousands of customers could be in danger

But after making payments to Global Debt Solutions for several months, the couple found to their horror that the money was not being handed over to creditors.

"Our creditors have taken us to court," says Mrs Murphy, "so we have County Court Judgements and now we're going to court on the mortgage."

The Murphys' debt problems had actually got worse.

"It's going to get to a point where we lose our house and lose our home. I don't know what we're going to do, to be honest," she adds.

'Seriously harmed'

Private debt management companies have 375,000 clients on repayment plans and take ?250m in fees, so it is a lucrative business.

Global Debt Solutions, later known as 3 Step Finance, has been shut down by the Insolvency Service, which found that it did not monitor payments properly.

Continue reading the main story

Where we have evidence we will remove a company's consumer credit licence, which means it cannot operate”

End Quote David Fisher Office of Fair Trading But now it has emerged that other companies have adopted the same tactic of accepting money from people in debt and not passing it on to creditors.

"It's apparent a lot of people have been seriously harmed by this practice," says Andrew Smith, a manager at another debt firm, ClearDebt, which keeps to the industry guideline of passing on any payments within five working days.

ClearDebt has taken on the files of 1,000 victims of another debt management company, Apex Debt Counselling & Management, which held back clients' money then went out of business.

Mr Smith says that there are as many as four other companies still using the same tactic and that up to 10,000 customers could be in danger.

Suicidal

The companies keep the money back as a ploy to try to negotiate a lower settlement with creditors.

But the customer runs a real risk that a company might fail while the funds are in its account.

"We've had letters from people who are feeling suicidal," Mr Smith says. "We've had people in our office who have paid in ?30,000 or more and seen their debt hardly reduce."

David Fisher from the OFT is promising action.

"We regard the practice as unacceptable," he warns. "Where we have evidence we will remove a company's consumer credit licence, which means it cannot operate.

"We will also next month be issuing stronger rules for the entire sector, which explain what we expect of them."

That is too late for Mr and Mrs Murphy. By that time they could be dealing with a repossession order.

They wish they had taken advantage of the free debt advice which is available from Citizens Advice, Payplan, National Debtline and other organisations.

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Banks 'must lend more to firms'

23 May 2011 Last updated at 21:24 GMT Under the government's Project Merlin deal with banks lending was to increase significantly Business Secretary Vince Cable says he wants a "significant improvement" after data showed UK banks are behind track in their lending to smaller firms.

Bank of England figures show that in the first three months of 2011, the top five UK banks loaned ?16.8bn to small and medium-sized (SMEs) companies.

Under a deal with the government, the banks had agreed to lend ?76bn to SMEs in 2011 - equating to ?19bn a quarter.

The banks said that the latest data demonstrated a "determination" to lend.

However, Mr Cable pledged to examine "further action" if bank lending did not rise.

Under a deal called Project Merlin, Barclays, Royal Bank of Scotland, Lloyds, HSBC and Santander promised to lend ?190bn to businesses in 2011.

Of the ?190bn, some ?76bn of credit should be made available to SMEs this year, about ?19bn every three months.

But the de facto shortfall in the first quarter of 2011 was about 12%.

However, gross lending to all companies in the quarter was ?47.3bn, which means that the banks are on course to meet their overall target of ?190bn.

In a statement, the Merlin banks pointed out that these were still early days for the agreement.

However, many small firms report that a bank credit remains hard to obtain, with viable companies under threat because they cannot get loans.

Mr Cable agreed that just one quarter's figures were not conclusive, but said: "There is a serious problem with lending to good, small companies.

"We looked to the Merlin agreement to rectify the problem and... we want to see significant improvement over the next few months.

"We will monitor the banks' performance extremely closely and if they fail to meet the commitments they have agreed we will examine options for further action," the business secretary said.

Tax threat

The Merlin deal was finally thrashed out in February, after a protracted and difficult series of negotiations between ministers and banks over the lenders' role following the financial crisis.

Continue reading the main story

Members of the government say that they will not accept that the demand for loans from small business wasn't there”

End Quote Robert Peston Business editor, BBC News The agreement did not just cover bank lending, but also a reduction in bank bonuses and a promise by the banks to be more transparent about their pay packages.

The British Bankers' Association has repeatedly said that its members are doing all they can to increase lending.

A spokesman for the Merlin banks said: "These numbers demonstrate the determination of the Merlin banks to lend to viable businesses - it has been a solid start to the year.

"Whilst these numbers are encouraging, it is too early to draw conclusions as to the year-end outcome."

He added that demand for loans by small businesses had been "muted".

But the British Chambers of Commerce (BCC) called the figures "disappointing" and said the "crisis of confidence" between banks and businesses continued.

BCC director general David Frost said: "Many companies complain about strained relationships with banks both during and after the recession.

"Over-centralised processes, unclear decision-making and a lack of proper, local relationship management from banks, mean that in many cases, business customers have been put off applying for finance," he said.

'Ridiculous situation'

John Morgan, chief executive of Object Matrix, a software company based in Caerphilly, south Wales, told the BBC that his bank had recently turned down a vital overdraft request.

Small business owner John Morgan said he was unhappy with his bank

"I would say that the lack of funding from the banks is definitely holding us back from expanding," Mr Morgan said.

"When you cannot even get an overdraft facility to fulfil a firm order, you are in a ridiculous situation."

The Federation of Small Businesses said that a recent survey showed that widespread problems remained.

John Walker, FSB national chairman, said: "It is not surprising that the banks have not met lending targets to small firms.

"A recent survey of members of the FSB found that only 16% had approached the bank for credit and of those 44% had been refused," he said.

'Not working'

Shadow chancellor Ed Balls said the new Merlin data was "disappointing", telling the Communication Workers Union's annual conference that he had warned the agreement would be "weak and toothless".

He said: "Just at the time when we need small and medium-sized businesses to grow so we can get our economy moving again, it is worrying that bank lending to small businesses is falling short.

"It is early days, but three months on the signs are that the Project Merlin plan is not working."

But Downing Street said the lending agreement was for a year, and it expected banks to keep to their commitments.

The Prime Minister's official spokesman said: "Bank lending will move around during the year, clearly it will in part reflect demand.

"The purpose of these bank lending agreements was to ensure that there was sufficient supply of lending for families and for businesses and they were based on an assessment of what we thought would be required by the economy this year.

"We expect them to keep to those commitments over the course of the year," the spokesman said.

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New fund for medium-sized firms

19 May 2011 Last updated at 11:50 GMT In exchange for funding from the scheme, firms have to give up a share of their business A new funding scheme for medium-sized companies has been launched by the government and the British Bankers' Association.

The ?2.5bn Business Growth Fund will see banks invest between ?2m and ?10m in firms, in exchange for a share of the business ranging from 10% to 50%.

Participating firms must have an annual turnover between ?10m and ?100m.

Business Secretary Vince Cable said the fund was "a good step", but others said more help was needed for small firms.

Lending commitments

"Private equity companies who used to put equity into companies got into the business of doing very big deals - they often wouldn't get out of bed for less than ?10m," Mr Cable told the BBC's Today programme.

"This [the Business Growth Fund] is meeting a real financial need, it doesn't solve all the financing problems of the economy, certainly not the SMEs [small and medium-sized enterprises], but it is a good step."

BBC business editor Robert Peston said the fund was "addressing a problem that may people have been complaining about for donkey's years".

He added that medium-sized companies in Germany had long had more access to equity funding than those in the UK.

The banks that are taking part in the fund are Barclays, HSBC, Lloyds, RBS and Standard Chartered.

The latest official figures for bank lending to small firms will be announced on Monday. As part of the Project Merlin agreement between the banking sector and the government, banks have agreed to lend ?76bn to small firms.

The Federation of Small Businesses (FSB) said it was giving the Business Growth Fund a "lukewarm" welcome.

John Walker, FSB national chairman, said: "We now need to see announcements made for smaller businesses, such as the ?76bn commitment through Project Merlin, come to fruition.

"Without sustainable lending to viable small businesses, growth, employment and capital investments will all suffer - as will the economy generally."

This view was echoed by the Forum of Private Business.

Alex Jackman, its senior policy adviser, said: "We must not allow the launch of the Business Growth Fund to become a smokescreen hiding the real issue.

"Our main concern remains the lack of affordable finance being provided to start-ups and other businesses which need significantly less than ?2m minimum on offer, and which are not eligible for the fund."

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