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MPC told to focus on business lending

Date Added: 05/07/2013  

The Bank of England's Monetary Policy Committee has been told it needs to take action to improve business lending in the UK if it is to be able to support the economy effectively.

According to the British Chambers of Commerce (BCC), solving issues relating to business lending ought to be one of the main priorities for the Bank of England (BoE) this year.

David Kern, chief economist at the organisation, stated that it was the right decision for the Monetary Policy Committee to hold interest rates at their current record low level for the UK of 0.5 per cent for another month, as well as to retain the quantitative easing (QE) scheme.

He said: "With the economy showing signs of gradual recovery, confirmed by the data we have seen this week including our own economic survey, there is currently no case for additional QE. An increase in QE risks adding to inflation later in the year, putting even more pressure on businesses and consumers."

Mr Kern said any shift in monetary policy has to wait until the economic recovery in the UK is in a much firmer position, with this providing reassurance to business owners and investors.

However, he called for the BoE to implement new measures designed to increase the amount of money being loaned to small to medium-sized enterprises (SMEs) in the UK. Despite the BoE and the government teaming up to launch the Funding for Lending Scheme last year, total loans to SMEs have actually fallen over the course of the last 12 months.

The comments made by the BCC come only a few days after Howard Archer, chief UK economist at IHS Global Insight, explained business lending has become a "black spot" for the Bank of England and fixing the problems in this area will be one of the main challenges for the Bank's new governor Mark Carney.

Mr Carney arrives at the Bank from the same role at the Bank of Canada and is the replacement for Sir Mervyn King.

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Posted by Julie Cutts

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