Bank lending

The Bank of England has announced that it is still very difficult for small businesses and start ups to get bank loans and overdrafts.

The Government also occasionally makes discontented noises on this very important subject.

Since the Government effectively has controlling stakes in both Royal Bank Group and Lloyds/HBOS, you might think that "noises" would be enough to get some positive movement.

Sadly, that is not the case.

UK banks are currently completely risk averse. Whatever high level discussions take place between the Government/ Bank of England/high street bank directors, in reality lending decisions are taken far down the line. Bankers working at the sharp-end are too busy worrying about their own job security to dream of loosening the purse strings for their customers.

Be clear. There is no solution to this issue within the current banking structure in the UK. The high street banks cannot be forced to lend more. In fact, recently published proposals aimed at strengthening the capital reserves of banks may reduce even further their willingness to lend.

The noise from the Government may increase - but lending is unlikely to go in the same direction!