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UK Banks unwilling to lend to businesses

Despite the billions of pounds of UK taxpayers money being pumped into the UK financial system a report by the Bank of England today poured cold water on hopes of an imminent recovery. The report confirms the worst fears of many, that despite significant investment into the money markets the Bank of England's quantitative easing and fiscal stimulus programs are having a limited impact.

It looks as though UK banks are still unwilling to lend to businesses for fear of default and further write-offs. Lending to businesses collapsed in April and remained very week in May which has to some extent caught many people by surprise. There also appear to be significant concerns in the business sector with regards to the refinancing of current debt levels, something we have seen with Liverpool Football Club for one, even though the UK government had promised an increase in liquidity.

The Bank of England has also noted an increase in interest rates amongst UK banks which has made finance more expensive for businesses and consumers alike. This comes at a time when UK base rates remained fairly steady at 0.5% with many people expecting little change in the short to medium term. Until the UK business arena has access to significant liquidity to refinance and invest for the future this looks certain to impinge upon any potential short to medium-term recovery in the economy.

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