Banking on higher profits

Curst greed of gold, what crimes thy tyrant power has caused.

Ooh goody. The big banks have made lots and lots of lovely profits.

That means that they’ll be able to pay the tax-payers/Government back all the money they were lent -to prevent them going under and financial Armageddon then ensuing… yada, yada, yada.

So, money back in our pockets – Yes? No. Apparantly it’s all bit more complicated than that. Britain has this huge defict partly because the last government felt it had no choice but to use government funds to shore up banks that had made some pretty ropey decisions and as a result were in danger – they claimed – of going under and taking even more people with them.

However, Britain also has a huge defict because the previous government allowed the economy to overheat. The banks that went hell for leather for the sub-prime market are partly to blame, the government is partly to blame, the Monetary Policy Committee is partly to blame, the general public that took on masses of cheap personal debt is partly to blame.

The people who aren’t to blame, it seems, are those who have been finding it toughest. Businesses, small and large, have struggled and gone under in the past couple of years because they can’t get loans and extra finance to fund growth – sometimes even survival. And many of these have been in the construction industry.

Which is why industry voices have joined those of Bank of England governor Mervyn King and Chancellor of the Exchequer George Osborne in demanding that banks start to lend money once again to businesses, to ensure that the fledgling recovery is not put in jeopardy.

It’s understandable, right and fitting that the banks are more cautious than they once were, given the size of the cock-ups in the past, but it’s not right that small business should be made to pay for mistakes caused by rash lending policies in the past.

That banks are businesses themselves and as such have a duty to their shareholders and their staff, is fair enough, but it will be a very sorry tale if we see these latest profits fed straight into bonus structures rather than fed out into the economy.

The swingeing cuts that the new government has only just begun to implement will hurt everyone, but they are about building a recovery. The banks need to do their bit to maintain that.

About Fiona Russell-Horne

Group Managing Editor across the BMJ portfolio.

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