By Marcus Leach
Following the announcement that the Bank of England will introduce two new stimulus packages aimed at improving what has been, in recent weeks, a worsening economic outlook in the UK, John Longworth, Director General of the British Chambers of Commerce (BCC), said the measures must deliver for the real economy.
On Thursday Sir Mervyn King, governor of the Bank of England, said that the new measures will provide billions of pounds of cheap credit to banks to lend to companies.
And Mr Longworth has said that, whilst good in principle, Chancellor George Osborne must make sure these sequels trump the originals (quantitive easing and credit easing.
“The continued rumbling of the eurozone debt crisis can be felt by both businesses and consumers across the UK," he said.
"Deficit reduction measures, while absolutely critical to the long-term health of the economy, have dampened demand, and the normalisation of the relationship between banks and businesses remains.
“Shoring up the financial system and efforts to sustain lending are essential for sustainable economic growth, particularly in view of the continuing systemic risk posed by the eurozone. So measures to underpin the financial system by improving liquidity, and boosting lending to businesses and consumers, are crucial.
“However, too many question marks remain over how the two new schemes will work. How, for example, will the Funding for Lending scheme be set up and monitored so that it does in fact deliver money to the real economy? Without more detail, followed by swift implementation, the future success of these schemes is still unclear.
“Growth cannot wait. In addition to these schemes, the government must also look to more radical measures. That means a state-backed business bank that will ensure new and growing companies can access the finance they need to invest in new products and services, export to new markets, and take on more staff. There are also measures that will help insulate the UK from some of the risks in the eurozone. Investment in infrastructure to create robust rail, air, maritime, energy and digital networks could be privately funded or kick-started by the public sector, with pension funds and sovereign wealth funds able to purchase the assets when the projects are completed.
“Additional Quantitative Easing and the Credit Easing programme have not had the desired impact on the real economy. Will the Chancellor and Governor make sure these sequels trump the originals?”
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