BUSINESS SECRETARY Vince Cable has called for action to tackle the overheating London housing market, warning that a premature rise in interest rates will hit the recovery in manufacturing and exports in the North of England.
Speaking during a visit to Sheffield, the Liberal Democrat MP told The Yorkshire Post that the housing bubble in the capital needs to be deflated.
Mr Cable said: “The risk is that if you continue to get this runaway boom in house prices in the South East and particularly London then the Bank of England is tempted to put up interest rates sooner than they otherwise would do and that in turn pushes up the exchange rate and that makes it difficult for people to export.
“That’s the worry and that’s why the boil has got to be lanced.”
He said the regulators are better organised now than they were at the onset of the financial crisis in 2008 and have more tools to deal with issues like rising house prices, including powers to restrict lending.
Mr Cable stressed that the Bank of England is operationally independent and said Governor Mark Carney has made it clear that the UK should not rush into increasing the cost of borrowing.
He added: “It is very important that what’s happening in the South East of England housing market doesn’t force premature early decisions.”
House prices in London rose by nearly 20 per cent in the year to April, according to the latest official statistics.
Mr Cable said he shared the concerns of the Confederation of British Industry and the Engineering Employers Federation that a rise in interest rates would damage the competitiveness of UK manufacturers.
He added: “The key priority is to make sure that we get a recovery that is balanced, that is led by manufacturing and other exports and we mustn’t get distracted from that.”
Mr Cable made the comments during a visit to GW Energy, a small engineering firm in the Darnall area of Sheffield.
The company designs and manufactures energy optimisation devices for a blue-chip customer base. It also makes units to help domestic users save money on energy bills.
Wayne Cramer, managing director and co-founder, said the company needed finance to grow but faced prohibitive terms from high street lenders, so turned to Funding Circle.
The peer-to-peer lender provided a £50,000 unsecured loan which has allowed GW Energy to expand into new premises and take on new staff.
Mr Cable said the emergence of peer-to-peer lenders and challenger banks like Aldermore and Handelsbanken and the activities of the state-backed British Business Bank, which is based in Sheffield, are signs of healthier conditions in the small business lending market.
He said: “If you look five years down the track, instead of just having these big four banks that dominated everything and have done for decades, businesses who want to raise money will have access to a much wider source.”
Mr Cable added that peer-to-peer lenders will make loans of £1bn this year and help to counteract the negative effects of RBS, HSBC and Barclays which he said have retrenched from SME lending.
Minister tops out £42m regeneration scheme
VINCE CABLE took part in a special topping out ceremony yesterday to mark a major milestone in the delivery of the £42m Fox Valley development in Stocksbridge, north Sheffield.
Fox Valley is being developed by Barnsley-based Dransfield Properties Ltd and will transform a 28=acre former industrial site into a mixed-use development with new homes.
The scheme includes a new warehouse for Tata Steel, retail and leisure units anchored by a 63,000 sq ft Tesco store and a new housing development.
Mark Dransfield, managing director of Dransfield Properties, said: “This is a complex site with many different elements and we have worked closely with Tata Steel to ensure that the steel works can continue to flourish alongside our own plans.”