The Bank of England has reported lending has fallen by £2bn

The flow of lending is essential for the growth of the economy, the Organisation for Economic Cooperation and Development (OECD) has reported the combined economies of its 30 member states – the world’s most industrialised countries – will shrink 4.1% this year. They also say that the current conditions, ‘continue to have a negative impact on activity.

It is essential that the supply of new lending is not held back any longer by banks with insufficient capital to meet losses associated with past lending’. The Bank of England has reported that lending to businesses fell by £2bn from April, and was 2.1% down from April 2008, despite fresh capital from the government and cash boosts into the financial system through purchases of gilts and bonds – a process known as quantitative easing. Howard Archer, an economist at Global Insight says, ‘This is worrying for recovery prospects and reinforces the belief that the Bank of England may feel compelled to further extend its quantitative easing program, despite recent improved economic data and survey evidence’.