Wednesday, January 5, 2011
Credit crunch continues for UK firms
Credit crunch is a phrase that I haven't heard used much recently.
Nevertheless, it is one that applies perfectly to the UK corporate sector. Since November 2008, UK firms have been repaying their loans to banks. On a net basis, firms have repaid a massive £75 billion.
The massive financial sector intervention was justified on the basis that it would support British firms. Perhaps low interest rates reduced corporate financing costs and kept firms from going bust. However, that sits rather oddly with the massive corporate repayment of loans.
Scratch the surface of the UK economy and nothing makes sense.