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Banking on recession? - 13 February 2012

Despite the fact that the UK’s Gross Domestic Product (GDP) fell by 0.2% in the third quarter of 2011, Scotland’s GDP rose by 0.5% in the same period.
But that increase in Scotland’s GDP included a 1.2% reduction in construction sector activity.

Further stimulus, in the shape of publicly-funded infrastructure and housing would help, not just to retain construction jobs, but to a give a future to unemployed young people.

But the public sector cannot be expected to stimulate economic recovery on its own ; bank lending is another vital factor.
Royal Bank of Scotland (RBS) , which is 83% owned by the taxpayer , undershot its agreed lending target for UK small and medium-sized enterprises (SMEs) by over £ 1 billion.

Pro-rated, that means Scottish SME’s lost out on over £100 million of lending.

RBS’s admission came just a few days after the announcement that Clydesdale, a medium-sized and still-respected bank in Scotland, has suspended all new commercial lending, pending a review by it owners, National Australia Bank.

If bank lending to Scottish SMEs was ever at an adequate level during the current recession, it has just got smaller.
Perhaps RBS’s fellow members of the UK’s “big five” banking group ; Barclay’s, HSBC, Lloyds/TSB and Santander will take up the slack, but anecdotal evidence says that they haven’t so far.

The British Banking Association implies that the failure to meet agreed lending targets for SME’s is mainly down to the SMEs’ reluctance to take out loans.
Many SMEs, it would appear, have battened the hatches to try to emerge from recession.
Presumably, not many that do survive will say thanks to the banks.

Charlie Gordon - 13 February 2012



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© Charlie Gordon 2012