Stimulate property and SME lending, says leading economist

THE Bank of England’s policy of quantitative easing has been “unimaginative” and has failed to benefit regional economies in the north of England, according to a respected economics commentator.

David Smith, the economics editor of the Sunday Times, told business leaders and entrepreneurs in Yorkshire that rather than quantitative easing, the Bank of England “would have been better creating an infrastructure bond or buying SME loans – it would have helped growth in the regions”.

Mr Smith told the audience, at a dinner last night in Leeds hosted by law firm Addleshaw Goddard, that the Bank “could have been more imaginative” in its long quest to boost economic growth since the onset of the financial crisis in 2007.

The audience at the Howard Assembly Room, included senior figures from Deloitte, Lloyds Banking Group, Phoenix Equity Partners, PwC, Dow Schofield Watts, HSBC, Leeds City Region, Leeds City Council, KPMG and major property firms Henry Boot and Town Centre Securities.

The Bank of England has pumped around £375bn into quantitative easing since 2009, buying mainly gilts from financial institutions, along with a smaller amount of relatively high-quality debt issued by private companies.

The aim is that banks, insurance companies and pension funds can then use the money they have received for lending or to buy back more bonds.

However Mr Smith said that QE had not worked. “Modern economies run on credit, if you have zero credit, you have zero growth.”

He said the Bank would have been better looking to stimulate the stagnant property and SME lending markets.

However he said it was not all doom and gloom. “A pet obsession of mine is that growth is stronger than the official figures suggest – the private sector has added one million jobs to the economy.”