If Wonga are trying to muscle in to the business market, we need a British Investment Bank more than ever

Payday lenders, not content with squeezing individuals, are now going after businesses too.

Anybody who lives in London and/or uses London buses will know that those ghastly Wonga adverts have been replaced. By Wonga adverts. Though this time, for small businesses.

Wonga for Business offers loans of £3,000 to £10,000 which are available for terms of between one and 52 weeks. Costs vary with an interest rate of between 0.3 per cent and two per cent which seems competitive if repaid early, but a 52 week loan, according to Tim Harford, at 2 per cent could work out to have attached to it an interest rate of 280 per cent per year.

Another estimate, this from Sharlene Goff (the FT’s retail banking correspondent), estimated that the largest loan (£10,000) for the longest term (a year) would rack up almost £11,000 in charges.

I exchanged emails with a spokesperson from the company during the week, hoping to find out some tangible figures for how well the new venture is going. All I was told, sadly, was that there have been thousands of applications thus far, and good feedback from people who have been approved, but due to the commercial nature of the company all evidence was kept under wraps.

OK so the suspicion is that it is all bluster. A commercial company with no evidence to show off saying that they're doing great to put the willies in their competitors. But I'm not so sceptical, unfortunately.

Wonga have come to be recognised as another unsavoury payday lender, and for good reason in my opinion, albeit one that is slightly more public-facing than the rest (and this says an awaful lot about the rest). Though what I've come to learn about this financial product is that it often fills in and exploits the gaps where mainstream services are falling behind.

This is the case with payday loans to individuals. And it is the case for businesses as well. Research in November by the Federation of Small Businesses showed that between 2007 and 2010 there was a 24 per cent fall in successful loan applications, while more than half of the small firms that applied for an overdraft last year were rejected.

Even in the good times things weren't sparkly. As Duncan Weldon at the Touchstone Blog has pointed out, "around 85 per cent of bank lending [had been] going to either financial companies or property" even in better financial times.

Competition in this market is rather flat as well. In 2011 the Independent Commission on Banking identified that the largest four banks account for 85 per cent of SME current accounts.

So though Wonga are playing on a very real problem in the state of play in the financial sector, the real issue lies in the failure of banks to lend to small and medium businesses – surely a vital element in our economic recovery.

But what is in our armoury? What tools can we use? It certainly didn't go unnoticed this week that Ed Miliband used the opportunity at the Co-operative Bank HQ to talk up the merits of a British Investment Bank – on the day that the Labour party published a report by Nicholas Tott, a former city lawyer, to make that very case.

Although, this case has been made again and again – why should it have taken this long? One of its most active proponents is Lord (Robert) Skideslsky. In one of his many cases for a national investment bank he exemplifies the European Investment Bank (the European Union's public development bank).

EU governments that own the EIB, in contributing an equivalent sum of £32bn, alongside the bank itself borrowing a further equivalent to £271bn from private capital markets, the EU governments were able to finance investments worth more than the equivalent of £304bn including for ports from Barcelona to Warsaw, the TGV network in France and the world-leading offshore wind industry here in Britain, creating jobs along the way.

Another example, in Germany, is the Kreditanstalt fur Wiederafbau (KfW), a second tier bank, provides cheap loans (liquidity loans at low rates and long maturities) to SMEs using the commercial banks as intermediaries. In 2010, KfW financed loans worth a record €28.5bn for SMEs, creating 66,000 jobs in addition to the 1.3m jobs it helped maintain (which has been on Labour's mind since Lord Mandelson made it the model de jour).

Why has it been most pertinant that Miliband raise the spectre of a British Investment Bank at the time he did (even though he, and others, commissioned the report by Nicholas Tott in December 2011)? Because as Skideslsky notes:

“The financial crisis has left the impression that the main purpose of the banking sector is to enrich a tiny elite at the expense of taxpayers.”

We may all understand in principle that a functioning financial system is crucial to the national economy, but we can hardly attest to this happening in practice (consider, if you will, the NEF calculation that for every £1 paid to “elite” city bankers £7 of social value is destroyed, as well as the damning verdict of Adair Turner, the chairman of the UK Financial Services Authority, who views the past decade of financial innovation as mostly "socially useless").

In short, a British Investment Bank is something that could gain cross-party consensus, provide a real solution to the lending shortfall, build up SMEs, jobs and growth – and allow entrepreneurs to avoid the lending freeze or risking it all with expensive business loans from Wonga.

As a parting shot the Wonga spokesperson told me that we can expect to see “more products from us before the end of the year, but I can't give you any hints I'm afraid”. Perhaps if we are diligent enough we can spot the financial shortfalls before Wonga get there first.  

A payday lender. Photograph: Getty Images

Carl Packman is a writer, researcher and blogger. He is the author of the forthcoming book Loan Sharks to be released by Searching Finance. He has previously published in the Guardian, Tribune Magazine, The Philosopher's Magazine and the International Journal for Žižek Studies.
 

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How Devon's humpback whale is dredging up the politics of the sea

The arrival of a humpback whale at Slapton Sands has caused a local splash. But the history of the village has a warning for those who think of the sea as spectacle alone.

The Devon coast road from Dartmouth to Torcross is as pretty as it is treacherous. After winding through a cliff-top village, the road ahead falls away to reveal a giant lake – the Slapton Ley - flanked by green hills on one side and ocean on the other. 

Tourists (or "grockles") gasp at the view and, in recent weeks, even locals have been staring out to sea - where a giant humpback whale has taken up residence in the bay.

Not seen at Slapton in living memory, the whale has swum into rural stardom. Hundreds have lined the beach with cameras and telescopes. The nearby pub and farm shop have seen levels of trade only usually enjoyed in the summer.

According to Keith Pugh, (the ice-cream-van-man who has been keeping the crowds supplied with tea) one lady from Plymouth caught the bus here every day for six weeks just to catch a single glimpse. That’s a four-hour round trip.

If this all sounds a bit fishy, that's because it is. Experts believe that the whale is feeding on the bumper numbers of small fish and mackerel that have been reported in the area. But even these are behaving in unexpected ways. “The mackerel are further north than usual for this time of year,” says Mark Darlaston, a photographer who first identified the whale as a humpback (and jokingly named it after storm “Doris”).

So what is the humpback up to, so far south of its northern feeding grounds? And should its presence be seen as a sign of recovery - for whales and UK waters in general? 

Not yet, say conservationists. And not if the history of Slapton is anything to go by.

Troubled waters

Villagers at Torcross, at the far end of Slapton sands, are familiar with secrets from the deep. In 1944, a military training in the bay went horribly wrong, when nearly 1,000 American servicemen were drowned. The tragedy was hushed up for decades.

But the greatest threat to the community comes from mismanagement of the sea itself. On 26 January 1917 the entire neighbouring village of Hallsands was swallowed by a storm. The tragedy was partially manmade. The underwater sandbanks, which had helped protect the shore from longshore drift, had been thoughtlessly dredged to supply building materials for the Plymouth docks. Some 660,000 tonnes of material were removed and never replaced.

The results of that plunder are still felt at Slapton today. In 2014, a gale-force storm swept away part of the road that runs between the sea and the ley. Just last year, the seawall at Torcross crumbled, as the protective beach beneath was carried away by waves.

Into the Brexit deeps

So much in our oceans is tightly connected to human activity. If whales are a rare sight on the UK coast, it is partly because of the human campaign against them for many years in the form of whaling. According to Sally Hamilton from the conservation charity Orca, the 1980s moratorium on whaling has helped some populations to recover. 

But others are still fighting to survive in the face of pollution, noise, and over-fishing. The UK’s last resident pod of killer whales looks likely to die out after high levels of PCB chemicals have stopped the females reproducing. In Norway, a stranded whale was found to have over 30 plastic bags blocking its digestive system.

There is also no certainty that the glut of fish that the whale is feeding on will come again next year. “There is still masses we don’t understand about the ocean,” says Will McCallum from Greenpeace, “Climate change and the threat of over-fishing mean that where fish are moving to is more unpredictable that it has ever been.”

And it's not just whales that could get caught out. Some UK politicians have demanded that a Brexit deal include blocking foreign vessels from fishing in British waters. With 58 per cent of UK-caught fish caught by non-British fleets, it is argued that a ban would benefit the UK industry.

But with migration patterns becoming more erratic, McCallum is sceptical. "Re-territorialising our waters would be an absolute potential disaster because we just don’t know where fish stocks are going to move," he says. 

Out of the Blues

At Torcross, the sea has long been a source of worry. Claire, the landlady at the Start Bay Inn, recalls the many storms that have pelted the seafront pub since she was a child. Just last year she was “running from one end to the other” trying to sweep the water out, while bottles rattled and the chip-fryer shook.

So it was perhaps unsurprising that news of the whale’s arrival first met with local concern. “I can’t bear to see it,” one woman tells me. She had read in the press that it had come so close in to shore to “beach” itself and die, and heard rumours it was in mourning for a lost calf.

But thanks to the investigations of Mark Darlaston and the divers at the British Divers Marine Life Rescue, such fake whale-news has been corrected - and its visits are fast becoming a source of wider hope. The owner of the Stokely farmshop has joked about replacing it with a decoy “nessie” when it leaves. Claire cannot wait to put its picture on the front of her menus (where the picture is currently of the recent storm).

It is not yet known what lies ahead for Brexit fishing policy, or for whales. But dip into the history of the village of Torcross, and it's clear that understanding and protecting the sea is inseparable from protecting ourselves.

India Bourke is an environment writer and editorial assistant at the New Statesman.