UK business lending slashed in face of lowered growth prospects…

Paying down baby debt may have sounded like a good policy in opposition, but George Osborne’s intervention to try and get banks (those largely publicly funded institutions) to lend money in an economy that’s as close as Ireland to contracting again, is faltering… The Daily Mail reports lending to business is down by £10 Billion on last year…

And Moody’s have put the UK on notice that its AAA rating is switched from positive to negative. They cite two primary reasons:

1.) The increased uncertainty regarding the pace of fiscal consolidation in the UK due to materially weaker growth prospects over the next few years, with risks skewed to the downside. Any further abrupt economic or fiscal deterioration would put into question the government’s ability to place the debt burden on a downward trajectory by fiscal year 2015-16.

2.) Although the UK is outside the euro area, the high risk of further shocks (economic, financial, or political) within the currency union are exerting negative pressure on the UK’s Aaa rating given the country’s trade and financial links with the euro area. Overall, Moody’s believes that the considerable uncertainty over the prospects for institutional reform in the euro area and the region’s weak macroeconomic outlook will continue to weigh on already fragile market confidence across Europe.

Not exactly Osborne’s doing says Paul in Lancs. Osborne’s real (but largely unspoken) excuse is uncannily similar to that of Alisdair Darling’s: there’s a meltdown in world credit markets on, and there’s no sign of it going away anytime soon.

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  • aquifer

    Does the overborrowed US dollar ever get a downgrade?

    The borrowing of US corporations makes them more like hedge funds.

  • FuturePhysicist

    Weaker growth? How did that happen?

    Surely the private sector should be booming now that government meddling has been pulled back?

    Or perhaps maybe some of the austerity measures are perhaps meddling in themselves.

    I admit that’s very reductionist.

  • Greenflag

    @ Aquifer,

    ‘Does the overborrowed US dollar ever get a downgrade?’

    What stops it from being rated AA instead of AAA is the fact that it’s still seen as the world’s ‘reserve’ currency .This enables the USA to buy scarce resources such as oil , raw materials etc with dollars . Quantitative easing is the policy which enables the USA to print as many dollars as it wants thus risking it’s world ‘reserve’ currency position . If the USA were to lose the ability to purchase oil in dollars then the price to consumers in the USA would probably double or treble thus driving the fragile economy into another tailspin of recession and then depression etc which would of course impact the rest of the world also .

    Whats needed is a new world financial order and an international currency agreement between the world’s major economic powers i.e the USA , EU, China , Russia , Brazil , Germany and Japan and maybe the UKand OPEC -another Bretton Woods as it were . This time around it will be much more difficult as the world’s labour supply has increased by an effective 2 billion since then and the newly emerging countries control much of the world’s scarce natural resources

    ‘The borrowing of US corporations makes them more like hedge funds.’

    You might think that but it’s the financial services sector borrowing or use and abuse of cheap monies -low or non existent interest rates which is the killer app. heres Mr Keiser laying it down again .

  • Well, what can any Government do to promote growth?

    Absolutely nothing. The sooner the Euro unravells the better.

  • Greenflag

    ‘what can any Government do to promote growth?’

    According to laissez faire ‘economics ‘ with interest rates approaching zero if not below zero in Switzerland and I believe there are moves afoot in the USA for some banks to start charging ‘negative’ interest rates if people want to deposit their money -by these signs -the economy should be booming with business investment sky rocketing .Instead what we see is quite the opposite .

    The banks ARE NOT LENDING to businesses .They are too busy indulging in speculative ‘gambling ‘ in international currency markets and cleaning up their balance sheets at the expense of American , and British and European and yes even Irish taxpayers and of course Greek taxpayers as well .

    The Euro ‘unravelling ‘ will not solve anything .It will just add more fuel to the current bonfire . The banks which were too big to fail and which are now even bigger need to be broken up by governments in the USA , UK and Ireland and in Germany. France etc .

    As we can see from the current international currency standoff at the ECB/IMF/FEDERAL RESERVE financial cartel the USA government wants the Greeks to kow tow because it fears a default outcome for American banks -ditto for the German , French and British and other governments . The Greek Government also fears a default for more pressing personal reasons i.e the threat of civil chaos , war and anarchy and their probable mass arrest by whoever rises to the top after the ‘revolution’.

    You will or should note that none of the governments neither the USA, UK, German or French or Irish care what happens to the Greek people -or the 50% of Greeks under 25 without a job or the large cutbacks in living standards etc etc .Far easier to blame the Greek governments both present and those of yesteryear and the Greek people for their ‘irresponsibility ‘.

    Indeed and they have a point . But when it comes to ‘irresponsibility ‘ either in financial management or in retailing fraudulent banking services is there a ‘bank’ in the western hemisphere that has NOT outgreeked the Greeks in this regard ?

    Shitehawks one and all ! (governments and banks ) and in the case of the politicians cowardly shitehawks as well .

  • Greenflag

    omission above second last paragraph.

    should read

    Far easier to blame the Greek governments both present and those of yesteryear and the Greek people for their ‘irresponsibility ‘. I mean who has ever heard Obama or Merkel or Sarkoczy or Cameron or Kenny or Cowen publicly denounce the major banks in their own countries for their ‘irresponsibilities’ in giving rise to this crisis or whats even worse not a one of them has come up with a policy that would ensure that their banking systems adhere to basic ethics instead of wholesale looting and gouging 🙁

  • FuturePhysicist

    Seymour Major (profile) 15 February 2012 at 3:09 pm
    Well, what can any Government do to promote growth?

    Absolutely nothing. The sooner the Euro unravells the better.

    A lazy idée fixe to think that would bring the UK growth in the event of a Eurozone collapse, the most likely result of which would be Sterling collapse.

    European financial crisis is one of continental conformity, and there is no free state west of the Urals, south of the Arctic Circle, North of the African Mediterranean coastline and Southern Caucasus mountains and East of Greenland would have any financial immunity.