Banks need to lend says TMA

But TMA (UK) believes that political leaders need to look beyond macroeconomic prognoses and pay more attention to the day-to-day business realities closer to the ground.

The communiqué noted “signs of stabilisation” in the world's major economies but warned that significant risks still remained. And Prime Minister Gordon Brown said rising oil prices, protectionism, and high unemployment could undermine fragile economies.

TMA (UK) Director David Hole conceded there had been encouraging statistics from some sectors of the economy. But he warned that the continuing liquidity crisis was still causing the loss of viable businesses, and urged the Government to initiate dialogue between business and the banks. “There is a reality gap between the experience of businesses on the ground and the claims of business lenders, and only Government action can bridge it,” he said.

“We're seeing a great deal of optimism about the economy from the Government and in the press, and we're hearing that business lending is recovering, but the reality as experienced by business is that the liquidity crisis drags on.

“The sting in the tail will be a continuing rise in unemployment that will prolong the recession and hamper recovery for many years to come.”

He said the Government needed to reconcile the different versions of the economy given by businesses and business lenders. “The Government needs to talk to professional bodies and associations representing businesses both large and small, like TMA (UK), to find out what is actually being experienced on the ground and then question the banks closely about the lending they are actually doing,” he said.

“The continuing shortage of finance is causing great uncertainty and holding back investment. We simply can't afford to continue losing businesses and jobs at the current rate or we will find that the recession has a very long tail indeed.”