Brown Must Act Quickly to Revive Lending in U.K., CBI Says
By Jennifer Ryan
Feb. 9 (Bloomberg) — Prime MinisterGordon Brown’s government must act quickly to revive lending as businesses battle the worsening credit squeeze, theConfederation of British Industry said.
The CBI, the nation’s biggest business lobby, published a survey today that showed 63 percent of U.K. companies said access to credit worsened in the last three months, and 59 percent said it will deteriorate further in the next quarter. The group questioned 131 firms from Jan. 14 to Jan. 22.
Some companies have cut jobs and pared investment while they wait for government plans to take effect, the CBI said. Brown said Jan. 19 the government will guarantee billions of pounds of bank lending to counter the lending slump that’s kept the U.K. mired in a recession.
“We want to press the government to move as quickly as it possibly can,” Richard Lambert, director general of the CBI and a former Bank of England policy maker, said at a press conference on Feb. 6. “Firms around the country are saying: ‘this is all very well, but when is it going to happen?’ Credit is still not flowing.”
The survey showed two in five firms cut staff because of credit-related issues, and that companies with more than 5,000 employees are faring the worst in the lending squeeze. Lambert said homebuilders and automakers are getting the hardest hit.
Job Cuts
Claims for U.K. jobless benefit probably rose by 88,000 in January, according to the median of 23 economists in a Bloomberg News survey. The level in December was already the highest in nine years. That data will be released on Feb. 8, followed by new economic forecasts from the Bank of England.
Ford Motor Co. said Feb. 5 it will cut up to 850 U.K. jobs and Honda Motor Co. has extended a shutdown at its plant in Swindon, England. Car sales in Britain fell 31 percent in January from a year earlier, according to the Society of Motor Manufacturers & Traders.
Redrow Plc, a U.K. homebuilder based in St. David’s Park, Wales, said Jan. 14 it sold 49 percent fewer houses in the six months through December as banks withheld mortgage finance.
Brown faces pressure to produce results from the bank bailout packages he has announced as the cost of giving lenders financial aid soars. Lawmakers from all three main parties have called on the government to restrict bankers’ bonuses.
He has offered more help to automakers. Business Secretary Peter Mandelson set out on Jan. 27 a plan to offer 2.3 billion pounds ($3.2 billion) in loan guarantees to car manufacturers to help them through the recession.
The Bank of England is also taking additional steps after rate cuts failed to revive lending. Policy makers last week cut the key interest rate a half point to 1 percent, the lowest since it was founded in 1694. They may start buying commercial paper from Feb. 13 to ease strains in credit.
“There’s significant macroeconomic stimulus in the pipeline that’s being held back because of the difficulty in getting credit flowing more widely across the economy,”Ian McCafferty, chief economic adviser at the CBI, said at the briefing.
To contact the reporter on this story: Jennifer Ryan in London atJryan13@bloomberg.net
Last Updated: February 8, 2009 19:01 EST