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Profiteering banks accused of failing businesses


Businesses are still finding bank funding hard to come by despite lenders claiming they have increased lending in the past three months, according to the Bank of England.

The Bank says lending has risen, but not as fast as hoped.

Nevertheless the spread, or margin, on corporate lending rose during the period - making them dearer - and survey respondents expect a further widening in spreads on business loans ahead.

The margin is the difference between the rates a bank borrows money and the rate that the money is lent to business.

The British Chambers of Commerce is concerned lending to businesses had not risen as expected in the quarter. The chamber fears that banks could prolong the economic downturn if they did not start "lending effectively".

Availability of credit, for both corporates and households, is viewed widely as absolutely crucial to a sustained UK economic recovery.

Lenders expect to increase loans to firms over the next three months as cheaper funding becomes available.  Part-nationalised Lloyds Banking Group and Royal Bank of Scotland also have to meet lending targets as conditions of taxpayer support.

To bank critics, it appears they are protecting themselves first by tightening lending criteria and increasing margins to maintain profits rather than work with the Bank of England and the government to stimulate economic recovery.

As more and more businesses face financial hardship and axe jobs, the banks seem to have all the tools at their disposal to help but would rather stand on the sidelines than join the fight.

David Frost, Director General of the British Chambers of Commerce (BCC), said: “This is particularly concerning news considering the pivotal role businesses will play in driving the UK out of recession.

“If the banks do not grasp the nettle and start lending effectively to the private sector they will simply be playing a part in prolonging this downturn. Banks have a responsibility not just to lend, but to lend to the wealth-creating sectors of the economy.”


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