Quantitative easing could fail to boost confidence, warns accountants James Cowper
In a move to stimulate economic recovery the Bank of England yesterday added to its quantitative easing (QE) programme for the first time since 2009.
It’s well known that banks are worried about the strength of their finances and since the onset of the credit crunch they have tightened up lending dramatically. By pumping cash directly into the economy the Bank hopes to stimulate lending and activity.
This, together with the announcement by Government earlier in the week of its credit easing scheme to underwrite loans made to businesses, should be welcomed but may not go far enough according to Thames Valley and South Coast accountants and business advisers James Cowper.
Sue Staunton, a partner at James Cowper, warned: “It’s not at all clear that QE worked first time round. More money might make a difference but the impact could once again be limited. The UK economy is very much driven and influenced by confidence at an individual level, and in all walks of life people are clearly carefully watching what they are spending.”
“Despite attempts by the Government to improve the climate, we are reminded almost daily that lending to SMEs is still at worryingly low levels. In principle banks should now lend more money but fears of a deepening eurozone crisis are likely to continue to encourage them to be cautious.”
Sue added: “More radical methods might be needed to boost confidence and persuade banks to lend and businesses and individuals to borrow. Otherwise I fear that everybody will carry on waiting for things to pick up because they are too afraid to make the wrong choice.”
Sue Staunton, Partner, James Cowper LLP +44(0)1865 200500 or email sstaunton@jamescowper.co.uk
07.10.11