UK Lending Falls Despite The Bank of England’s Best Efforts

It has been announced that despite the Bank of England’s (BoE) Funding for Lending Scheme (FLS) where around £14bn has been made available to the high street banks the amount of money the banks are lending has fallen! In the final quarter of 2012 lending fell by £2.4bn with some of the major banks such as Lloyds and RBS lending less than before. For the UK to avoid recession the banks do need to lend more, this is why the FLS scheme was introduced and so should the banks continue to not lend funds then I find it hard to see how the UK economy will grow. The apparent failure of the FLS also potentially highlights the pressure some of the largest UK banks are currently under – they have been offered £14bn in cheap loans from the BoE and yet they are still not lending, this does not inspire much confidence. The FLS scheme was meant to mean more mortgages were agreed in order to help boost the UK housing market and also more funds were lent to businesses to help the UK retail, manufacturing and service sectors. All in all this is a good idea, as long as the banks make the loans. However, the banks appear to be more risk averse (when it comes to lending to the general public) and therefore the take up has been low. This is more bad news for Sterling and so could put further pressure on GBP exchange rates.

UK Economy Under Fire As Osbourne Battles Bankers Bonus Cap

A report released yesterday has shown that UK business is too focused on short term success rather than planning for long term growth which as a result is preventing the economy to recover and grow. The report stated that this short term focus deters companies from investing in research, recruitment and new products and so can damage the UK’s economic prospects. At the same time the UK economy was under pressure Chancellor George Osborne has travelled to Brussels to try and argue against the recently proposed bankers bonus cap. Osborne is against a cap where bankers can only earn a bonus which is as much as their annual salary because he is concerned it will drive some of the best talent away from the UK and mean that London, the largest financial centre in Europe will suffer. At present it doesn’t seem likely that the proposal will be over turned so it could be that Osborne is wasting his time. So, while the UK economy suffers our leading politicians are trying to allow our bankers to earn massive bonuses! This to me shows what a bad state of affairs we currently face and I think we are likely to see things get worse and I am struggling to see how we will avoid recession. It will take some very positive news to turn things around and with the UK banks not lending, UK business under pressure and political instability I can’t see where that positive news will come from.

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