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The plan, which is being hailed as one of the major announcements of the conference, will see £1bn of taxpayers’ money injected into the new venture designed to help businesses struggling to borrow from traditional high street banks.

The public money, which the government hopes will be matched or exceeded by investment from the private sector, will come from existing budgets and will not require additional government borrowing. However, exact details of where the money will come from will not be revealed until Chancellor George Osborne makes his Autumn Statement on 5 December.

The bank will not have high street branches but will act as a wholesale institution, offering access to funding through innovations such as peer-to-peer lending, which connects people with money to people who are looking to borrow.

Mr Cable said: ‘The government understands the frustration felt by many small- and medium-sized businesses around securing credit, especially from the big four retail banks. Many new, promising, growing companies simply can't get the loans they need to expand on reasonable terms. Manufacturers, exporters, startup companies are struggling to finance growth. We are going to help fix this.’

 

According to officials, the British Business Bank is expected to be operational within 12-18 months.