The untouchables
3 Aug 2010
Banks are back in the news. Back in the good news that is with the sector generally upbeat about its improved performance. Reasons to be cheerful? Reasons to be cynical more like.
HSBC (which did not receive direct government support during the recent banking crisis) has reported pre-tax profits of £7bn for the first half of 2010 with the rest of the UK’s major banks also expected to report an improved performance this week.
While this profitability is good news for bankers and their shareholders it’s highly questionable whether it means much for anyone else. For example, HSBC’s lending to small businesses actually fell by two per cent in the first half of 2010 and there is growing political pressure on banks to increase lending.
David Cummaford, who runs Abcoma, a manufacturing company in Oldham, told the BBC: ‘We have a full order book of more than £1m and we could employ an extra 10-12 engineers tomorrow if we had access to more cash. But in order to make machinery, you have to have capital. My bank manager says he would like to lend us money for working capital but the powers above him are making it almost impossible, even with security against property.’ Companies such as Abcoma are obviously not alone.
But I suspect that the major banks will continue to cock a snook at small businesses. Yes there is political pressure on banks to lend more but most of this is eyewash. The major banks have been given a clear message during the bail-out and subsequent spending cuts, namely that their health takes pre-eminence over every other sector of the economy and society. They are the one foundation that cannot be left to fall. They are the untouchables.
There is a strong vein of truth to this: our current economy simply cannot function without a viable banking sector. The unfortunate outcome of this is that the banks see this as being given carte blanche to lord it over the rest of the economy. Not a pretty sight.
Lyndon White
Editor, Processingtalk
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