Why are banks so central to the UK economy?
If nothing else the last few months has shown how vital the UK banking network is to the UK economy and the prosperity of the UK population. But why is the UK banking sector so vital and what role does it really play in everyday life?
The UK banking sector offers the food which feeds the UK economy from both a business angle and a consumer angle. Businesses would find it very difficult to prosper without liquidity and debt management services and the consumer would find it near impossible to acquire such things as homes and large ticket items without taking on debt. In simple terms banks are the middlemen of the UK economy bringing lenders and borrowers together in return for a small profit on each transaction.
The slowdown in the worldwide money markets was a prime example of what happens when one side of the equation fails, putting the whole system is put in jeopardy. This is the reason why the UK government has spent billions upon billions of pounds to try and introduce more liquidity to the markets under the assumption (correctly or incorrectly) that this increased liquidity would be made available to the UK consumer and business arena.
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