UK braced for next crunch as Wall Street grinds to a halt

Tuesday, July 20, 2010
By Paul Martin

Double dip fears as bank loans dry up

George Osborne and Vince Cable anxious that rationing of lending to small businesses could reverse recovery from recession but banks claim there is no demand for credit

Larry Elliott and Jill Treanor,
Tuesday 20 July 2010

George Osborne and Vince Cable will spell out next week the dangers of a double-dip recession caused by a drying up of bank lending to Britain’s hard-pressed small and medium-sized businesses.

green paper, to be rushed out by the chancellor and business secretary before next week’s parliamentary recess, will acknowledge the scale of the lending rationing crisis, which could “abort” the fragile recovery.

As the Bank of England (BoE) published data showing yet another month when more loans had been repaid than had been granted, Cable admitted the level of anxiety in the government about the flow of funds to smaller companies. He said: “The green paper will acknowledge the scale of the problem and how the recovery could be aborted if we don’t get on top of this.

“There is a fundamental policy conflict between efforts to make the banks safer and our wish to get them lending more freely to promote growth,” Cable said.

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