The scheme, which was first announced at the Conservative Party Conference last October, has cleared the final hurdle after it was deemed to be in line with state aid rules for banks.
That clears the way for the NLGS to be included in George Osborne’s Budget next Wednesday (21 March) along with the £1bn Business Finance Partnership for "mid-sized businesses".
The NLGS will see the government provide state guarantees against unsecured loans made by UK banks to businesses with a turnover of less than £50m. The scheme is intended to pass on the benefit of the government’s low borrowing rate to UK business and is expected to lead to a 1% reduction in the rate of interest charged.
In his last speech ahead of the Budget, delivered to the EEF Manufacturers’ Dinner last week, the chancellor said: "We want to use the hard-won low interest rates government can borrow at to reduce interest rates that small businesses can borrow at."
Meanwhile, the Business Finance Partnership will see the government invest directly in funds that lend to mid-sized businesses, providing them with a new source of investment outside the traditional banks.
However, while the availability of credit remains a major concern for UK SMEs, of greater concern to many will be the upcoming 5.6% hike in business rates from April 2012.
The British Chambers of Commerce (BCC) has called on the chancellor to scrap the upcoming business rate rise, which it has said is "anathema to growth". The BCC argued: "The 5.6% up-rating of business rates will severely aggravate already uncertain business cashflow and impose hefty new costs without offering any real improvement in business conditions."
It has also called for the restoration of the Empty Property Rate Relief (EPRR) to £18,000 and the introduction of a time-limited £1bn capital allowance scheme for medium-sized companies.
The BCC argued that a "when it’s gone, it’s gone" capital allowance scheme would incentivise firms that have put large investment projects on hold, and recommended a two-year window for businesses to take advantage of the opportunity.
Another key measure proposed by the BCC, following a quarter in which youth unemployment rose 16,000 and remained above 1m, was the doubling of the amount of money available for employer wage subsidies and funded placements under the new Youth Contract from 1bn to 2bn.
BCC director general John Longworth said that the chancellor had to "pull out all the stops to boost British business by providing them with a Budget for growth".
BCC chief economist David Kern added: "We urge the chancellor to use next week’s Budget to introduce measures that will allow businesses to create even more jobs. The government must ensure that the Youth Contract scheme works effectively, and should scale incentives for businesses to hire young people.
"Tax rises, like the business rates rise scheduled for April, should be scrapped to give employers confidence."
The 2012 Budget will start at around 12:30 on Wednesday 21 March, following PMQs. PrintWeek will be providing live text coverage of the chancellor’s speech, followed by printweek.com's detailed analysis of what the Budget means for print..
