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Business welcomes second bank bail out

Business groups have supported the government’s move to boost the credit market with a second multi-billion-pound bail out of the UK’s banks.

The latest measures will see the government offering banks guarantees against losses on bad debts, extending a scheme that enables banks to exchange illiquid securities for government bonds, and underwriting new issues of mortgages and loans bundled as bonds.

The hope is that the new boost to bank liquidity will encourage more lending to businesses starved of vital finance.

Richard Lambert, the CBI’s director-general, said: “Extraordinary times demand extra extraordinary policy solutions. The viability of ordinary businesses was under threat, putting jobs and investment across the land at risk. The Government needed to be bold and it has been.

“These measures are the essential pre-cursors for economic stability which will expand the availability of credit, open new channels of credit and get the economy working again.”

Mr Lambert added: “These measures are not silver bullets that will turn the economy around overnight. However, if fully implemented they should stem a further downward recessionary spiral and provide a stable economic platform on which the UK can trade through this difficult period.”

David Kern, chief economist at the British Chambers of Commerce, commented: “Since the original bank bailout failed to unblock the paralysis in the credit markets, it was clearly necessary for the government to take further measures. But, the dangers to the UK’s public finances are huge.

“If the new measures fail to work the government must be prepared, however reluctantly, to do the lending job directly.”