Business will benefit from banking bailout soon says Bank’s Barker

BUSINESS should not expect to see the benefits of the banking bailout overnight, but they should come through within the next few months according to a senior member of the Bank of England’s Monetary Policy Committee.

Speaking to TheBusinessDesk.com, Kate Barker said that the Bank of England is hopeful that it can bring inflation back to its 2% target in less than two years.

Ms Barker, a former chief economist for the CBI, said that she believed smaller businesses would see the benefits of the recent banking recapitalisation.

New business secretary Peter Mandelson will meet bank chiefs today to urge them to increase lending. The banks have been criticised by small business for maintaining a conservative position despite the £37bn government bail-out.

To see a two minute video interview with Kate Barker click play on the screen below.

[VIDEO: 16]

“I would hope that smaller businesses will start to find that the banks do take a different attitude but it is not going to happen tomorrow, but I hope it will happen over the next few months,” she said.

“The banks need to feel that they are in a better position. It has been difficult for them to get money for any length of time. You would expect that [the banking recapitalisation] to feed through, but in the same way that when this crisis started it took quite a long time before the tightening really came into play. I wouldn’t necessarily expect that to turn around very quickly. The bank recapitalisation is in the very recent past, the banks have got to think where their policies are going to be so I don’t think we will see an immediate change in bank policies. And in any case, it is not going to go back to how it was prior to this crisis starting.

“We would certainly hope over the next few months that the actions that have been taken start to feed through to businesses because we certainly realise that small businesses particularly are finding it much more difficult to get finance and are finding tighter conditions on the finance that they already have,” said Ms Barker.