The banks tell us not many businesses want to borrow money. Many have unused overdraft or loan facilities. They say there is money there if you want it. They have just announced a useful £1.5 billion equity fund for small enterprises.
Companies tell us there is a shortage of money to grow their companies. Some report facilities being withdrawn, high arrangement costs, and high rates compared to base rate if you do get a loan offer. Small entrepreneurs have to offer high levels of personal gurantee. Banks still seem to like property backing to loans, which may not always be possible in business.
So who is right? As always there is some truth in both these positions. I do think if we want faster growth there needs to be easier credit for business.
The banks are still slimming their balance sheets to hit ever more exacting targets from their regulators. RBS is slimming from £2.2 trillion to £1.2 trillion. It is a global bank, but some of that is liquidity withdrawn from the UK.
If the government wishes to speed things up it should ask the Regulators to call a halt to making the banks ever more prudent, at least for a year or so. If things start to warm up, then the Regulators should ask for more cash and capital to calm them down. The main reason QE has not fuelled a more rapid inflaiton is the strict controls on the banks lending it on. We do not need more QE. We need a sensible and controlled release of some of the pent up money already in the system for more productive uses.
Rumours are going araound that instead of doing this the Regulator is about to demand a still higher level of prudence. No wonder there are difficulties for businesses in getting access to capital.