The Bank of England has said today that they will provide cheaper funds to banks which in turn the bank can lend to businesses and other retail customers. The amount that Bank of England will lend will be equivalent to 5% of the amount the banks have currently lent. The bigger attraction for the banks is that the more they lend, the more they will be able to borrow from the Bank of England. As it stands now, there are no upper limits. It is estimated that the lending amount will be at least £80 Billon in its initial phase alone.
Kesh Thukaram, Director of Best Insurance welcomed the move from Bank of England and said that it is a very interesting that the Bank of England is being more proactive than ever and said that the best part of this new initiative is that the lending from Bank of England to the banks is conditional that the money is lent out to individuals on mortgages and also to businesses on loans. This will ensure that the banks donít scupper the cash and hoard it. It also means that for the first time in the last 2 years, once again the businesses can hope to get some more lending from the banks.
The UK is going through a very deep recession and going by the bellwethers of economy ñ the numbers from the construction sector and the latest figures from Marks and Spencer, it is expected that the second quarter will yet again will be a one with negative growth. Continued recession and over cautious approach by businesses has been damning the growth. Uncertainty in Europe and constant distractions such as Jubilee weekend and incessant rains means that the economy is not getting a clean run. The unemployment numbers are still on the rise and it is predicted that the number of people registered with Jobcentre is bound to rise yet again.
The only silver lining in all these is perhaps that people are becoming more cautious and arguably taking more responsibility for themselves. The demand for income protection is on the rise. People increasingly realise that just depending on the Government and income support will not be sufficient and they have to take responsibility which is not such a bad thing after all.
With the bank lending increasing and people taking more responsibility one can only hope for a better second half for 2012.
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