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Business lending 'a black spot' for BoE governor

Date Added: 02/07/2013  

The new governor of the Bank of England is going to have to tackle business lending if the economic recovery in the UK is going to gather pace.

Mark Carney arrived in the role yesterday (July 1st), taking over the position from Sir Mervyn King, with a large list of items on his agenda for his first month in the job.

But close to the top is likely to be the ongoing issues with business lending, with the amount being loaned to small to medium-sized enterprises (SMEs) having fallen over the course of the last year despite the Bank and the government's best efforts.

Last summer, they teamed up to launch the Funding for Lending Scheme and while this has helped to boost the amount being lent to homeowners in the form of mortgages, it appears that banks are not as willing to lend to SMEs.

The latest data revealed by the Bank of England shows that lending to non-financial businesses dropped by £1.3 billion, with loans to SMEs dropping by £500 million.

Howard Archer, chief UK economist at IHS Global Insight, said: "While Mr Carney will likely be pretty pleased with the first set of data released under his tenure at the Bank of England - stronger manufacturing activity, improving mortgage approvals and increased consumer credit - the weakness of business lending is a black spot."

Mr Carney will struggle to get the economic recovery speeding up unless he can open up the flow of credit to those small firms that can grow and boost the economy as a result.

The former Bank of Canada governor was widely praised for using the London Underground to get to work on the first day of his new job, but he has a lot on his plate as he bids to be a success in his new role.

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Posted by Julie Cutts

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