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If the economy is improving why are banks not lending?

The UK economy at the moment is very much like a seesaw with a number of positive reports improving confidence yet a number of downbeat factors bringing many people back down to earth again. Even though a number of reports of late are suggesting a significant improvement in confidence across the board and a potential stabilisation of the UK economy we have yet to see any significant follow-through in the banking sector.

Banks are still averse to lending money to "viable businesses" and even more concerned about increasing their liquidity levels in the mortgage market. These are two very different sides of the UK economy that would indicate that the heartbeat of the economy, i.e. the financial sector, is not yet ready to call an end to the recession. Analysts and experts can huff and puff as much as they want but at the end of the day, without any real liquidity for the mortgage market and the business arena there is very little scope for a significant recovery.

The green shoots of recovery may be there but their water, which is liquidity in the money market, has not yet appeared and these green shoots may be in danger of dying if left unattended.

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