Plenty of talk but still not enough action by the banks

 

OUTLOOK: Does the British Bankers Association inhabit a parallel universe? It certainly appears that way when you look at its lending numbers.

Here’s what the BBA’s chief economist says about the latest set: “Mortgage lending has leapt 50 per cent since this time last year, whilst we are now beginning to see growth in net lending to manufacturers and retailers.”

So everything’s rosy in the garden. You want a new home? You got it. Starting off a shop, or a company that makes things? Congratulations, your loan’s been approved. Now go off and get that economy working again! 

Well, up to a point. It’s true that mortgage lending is on the up and is indeed at its highest since August 2008. But the BBA should be careful of blowing the industry trumpet here. 

By historic standards the numbers are still low, and August 2008 was in the middle of the financial crisis when banks weren’t exactly throwing money at homeowners. Look at the net figures, the actual amount of new money on the table for home buying, and a very different picture emerges. It’s barely off the floor at plus £700m having contracted throughout most of 2013. 

But what about business loans, there’s surely something to cheer about there, right? Erm, not so much. Lending to manufacturers is picking up, it’s true, but it surely needs to given the length of time it has been contracting. There was also an increase in lending to retailers, but it was tiny. Meanwhile, lending to all other sectors shrank. 

Here’s what the BBA said to accompany the figures: “The stock of borrowing by non financial companies was £281bn by the end of 2013 and continued to contract overall in January and February. And again, there are cheap funds sloshing about. 

Yes there are tentative signs of improvements, but they’re modest at best. The BBA’s appears to think having some dregs in the bottom of a glass of wine justify its calling that glass half full.

What the British economy needs from an industry which received such a vast amount of taxpayer funded largesse is not talk like this, but action. That still appears to be in short supply. 

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