New bank funding schemes won’t make businesses want to borrow

Dated: 15 June 2012

Responding to the liquidity and ‘funding for lending’ schemes announced by the Chancellor and the Governor of the Bank of England last night, Graeme Leach, Chief Economist at the Institute of Directors, said:

“Facing a bombardment from the euro zone the Chancellor and Governor are calling up the reserves. Defensive measures need to be put in place and they’re making sure everyone knows they’ve done it. The extended liquidity and funding for lending schemes are welcome, but limited.

“The liquidity scheme will need to be massively expanded if break-up and contagion spread across the euro zone. The funding for lending scheme helps the supply of money and the demand for it, by lowering the cost of borrowing. But the core problem remains. Companies alarmed by the euro crisis will not be eager to borrow regardless of the cost.”

ENDS

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Edwin Morgan
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Email: edwin.morgan@iod.com
Website: www.iod.com/policy

Notes to editors

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