000745 - Forum 26/1/09 10:58 Page 1
START LENDING NOW
It is obvious that the banks are the real culprits that have brought to Burberry, no doubt further eroding our already depleted
the global economy to its current parlous state. Although the blame manufacturing industry that now accounts for only 13% of GDP.
also resides with governments whose embrace of free market ideas
appears to have blinded them to the need for stricter banking It is a further irony that the banks who have been guilty of so much
regulations to protect that free market. The irony is that we are now irresponsible lending now appear to be penalising business
seeing the Labour government, which over the past eleven years has customers that have acted responsibly. No doubt the majority of
done its best to eschew socialism, being forced to take our failing those affected are small and medium-sized companies, many of
banks into partial public ownership. them in the construction industry. Why are the banks behaving in
this fashion? Presumably they are fearful for the future of these
Most businesses would look upon such rescues as humiliating but it companies and the lenders believe they need to reclaim their assets
is difficult to find much evidence of the banks being humbled. now because their values will fall. Such actions are likely to make
There are examples like the one related recently by a hirer who was for self-fulfilling prophecies.
surprised when a long-standing customer, with an impeccable credit
record, went into administration. The hirer contacted the owner, who Our government now appears to be waking up to the problem and
told him that the business had an overdraft facility of up to has launched a second package of measures to encourage bank
£500,000; it had used £450,000 and had never defaulted on lending. Will this second round, which includes making available
payments. This did not stop the partially privatised bank from government insurance against bad debts, be more effective?
demanding that the overdraft should be reduced to £50,000 in seven
days! Not surprisingly this was impossible, so seven days later the Even if it is effective, there remains the problem of escalating
bank put the company into administration. government debt and its effect on sterling. Speedy’s latest trading
up-date - see City News page 9 and Tool Hire Top Ten 2009
That is anecdotal evidence of the sheer arrogance that continues to commencing on page 17 - draws attention to the growing
permeate our banking system, but let’s now add the weight of JCB dependence of construction on spending on public and regulated
to it. In January, on the announcement of a further 684 sector projects. How long can the government maintain such
redundancies, JCB Chief Executive Matthew Taylor said that in expenditure as its own finances deteriorate, because of its financing
November the company had been expecting “a moderate second of the banks, and, as the recession gathers apace, the double
quarter recovery in 2009” because of the re-capitalisation of the whammy of falling tax yields and rising benefit costs?
banks, but two months later customers were still unable to access
credit. Government and banks alike should be mindful of the damage that
is being done daily to the construction industry. Speedy Chief
He continued, “The ongoing reluctance of the banks to provide Executive Steve Corcoran describes their attitude as quite
credit is aggravating an economic downturn which is now becoming “perverse”, pointing out the construction industry is responsible for
much steeper than we could ever have envisaged. This 9% of GDP and employs one in ten of UK workers.
unprecedented situation needs to be addressed with some urgency
so that confidence and stability can return; otherwise irreparable Have banks forgotten their purpose? Their irresponsible lending in
damage will be caused to the UK’s manufacturing industry.” recent years has given way to a denial of their obligations to
responsible customers. For the sake of UK business as a whole,
Recent weeks have seen a succession of redundancy and the construction and hire markets in particular, banks must start
announcements from other blue chip UK manufacturers from Jaguar lending again now.
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