Belfast Telegraph

Flow of credit the real litmus test

By David Elliott

A little-noticed nugget of data from the central bank in the last few days has given one of the clearest indications yet that things are on the up.

The Bank of England, that bastion of all things monetary, said its harem of commercial banks in the UK have finally got round to opening the lending tap to businesses.

And encouragingly, it expects the flow of credit from the big institutions, and presumably others, to pick up in the months ahead as the economy picks up and demand for credit increases. This is obviously a view that has emerged from within the banking world because time after time we hear from bankers that they are itching to lend more but nobody wants to borrow money.

On the other side of the coin, business bosses will tell you they've been demanding a credit line but are getting rejected at the first hurdle.

The true answer probably lies somewhere in between the two but, as with all markets left to their own devices, growing demand in a more confident market should make banks more happy to lend and businesses more happy to borrow.

That's the theory but whether it works out in practice is another matter.

The banks are still running their fingers under the cold water tap having been burned by the credit crunch and will be entering any new 'boom' gingerly.

Belfast Telegraph