Bank of England’s Roundtable offers UK Businesses little comfort

London – 14th January 2010

The last Bank of England Roundtable of 2009 offered UK businesses a bleak short-term outlook, it has been revealed in minutes released this morning.

Experts suggested that many corporate borrowers, including small and medium businesses, had continued to find “credit conditions highly restrictive,” despite reports that credit conditions for businesses had improved in the latter part of 2009.

Paddy Earnshaw, CRM Director at Travelex, the world’s largest non-bank FX Payments Specialist, said, “Despite the fact that billions have been injected into the financial system through the Bank’s quantitative easing programme, this is still being used to build up balance sheets and asset prices.

“Relatively little credit has filtered through to the UK’s businesses, particularly SME’s, who are struggling to stay afloat and borrowing remains both restricted and problematic

The Roundtable also suggested that businesses who need to increase stocks to sustain their recovery would find it “difficult to raise the necessary finance”, given the tight credit controls.

They also expressed concern that credit conditions had affected growth in the UK’s export trade, and had counteracted the potentially positive effects of a weak pound. They also suggested the UK’s competitiveness in the international markets had not increased as much as it should have done.

Earnshaw comments, “The UK’s export-led strategy has continued to disappoint the industry. Although the trade deficit fell marginally in November and in spite of the continued weakness of the pound, there has been little sign that our economy is redressing our export/import imbalance. Factor in the tight credit conditions and the UK’s ambitious export-driven and investment-led exit strategy from recession looks unrealistic.”

The Roundtable also commented that prospects for the UK Labour market were “highly uncertain,” with most expecting businesses would “choose to work their employees more intensively, rather than recruiting new staff.”

Earnshaw continues, “We’re seeing Finance Directors taking every opportunity to manage their cash-flow more closely, which includes the way in which they’re making their international payments.”

However, despite the Roundtable’s cautious outlook, Sterling held a 1 month high against the dollar this morning, soaring as high as $1.6309. It was boosted by a run of positive data that boosted investors’ hopes the Bank would bring their quantitative easing programme to an end in February.

ENDS

Media enquiries
Jessica Buttress
Head of PR for Travelex Global Business Payments UK

Tel: 0208 415 4204
Mob: 077954 497129

Email: jessica.buttress@travelex.com.

Notes to editors