MPC must reinforce measures to increase lending to business

5th December 2012

Commenting on today's Monetary Policy Committee (MPC) decision, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said: -The MPC's decision to maintain QE at £375bn and hold interest rates at 0.

5% was no surprise. It should be noted, however, that there has been an increase in QE with the recent transfer of accumulated gilt coupon payments from the Bank of England's Asset Purchase Scheme to the Treasury. While we welcome the recent shift of opinion against adding to QE, we are concerned that the Committee remains divided on the subject and an increase shouldn't be ruled out. -We believe that a further round of QE should only be considered if new threats emerge to the stability of the UK banking system. An increase would only add to longer-term risks of bubbles, financial distortions, and higher inflation, with little benefit to the UK economy. The new OBR forecasts reinforce the arguments against adding to QE, with annual CPI inflation expected to remain above the 2% target for a considerable time. Higher inflation would squeeze disposable incomes and would threaten any revival in growth. -To boost growth, the MPC and the government should do more to support a revival in business lending, both by using the existing QE programme more efficiently and by exploring other measures. If the MPC agrees to purchase private assets other than gilts, such as securitised SME loans, banks would be less risk-averse in lending to businesses. The poor results from the Funding for Lending scheme earlier this week add weight to the case for a fully-fledged British Business Bank. Although the Chancellor confirmed his support for this in his Autumn Statement, we were disappointed that there was no clear timetable for the Bank's creation. We would urge the government to act swiftly so that funding reaches viable, growing companies, which will in turn drive economic growth.

You might also be interested in

Local Businesses List Cleanliness, Safety and Retail As Their Top Priorities For Improvement in South Yorkshire’s Civic Centres

Mon 8th July 2024

Safety, cleanliness and the quality of retail have all been cited by South Yorkshire businesses as top priorities for their local urban cores. This is according to the recently-published findings of the Town and City Centre Survey.

BCC Quarterly Economic Survey: Business Confidence Continues To Tick Up in Q2

Mon 8th July 2024

The BCC’s Quarterly Economic Survey – the UK’s largest and longest-running independent business survey – shows measures of business confidence and business conditions slightly improved in Q2 2024, albeit from a very low base.

Bank Seeks Further Evidence Before Rate Cut

Mon 1st July 2024

David Bharier, Head of Research at the British Chambers of Commerce reacts to the Bank of England’s latest interest rate decision

BCC DIRECTOR GENERAL SHEVAUN HAVILAND: STOP TREADING ON EGGSHELLS AROUND EU TRADE

Mon 1st July 2024

Director General of the BCC, Shevaun Haviland, has urged the next Government to stop treading on eggshells around trade with the EU if it wants to grow the UK economy.