Chamber urges Credit Easing as interest rates remain static

Business leaders in the West Midlands welcomed the Bank of England’s decision to keep interest rates at 0.5 per cent for the 32nd month in succession and to boost the economy by £75 billion through Quantitative Easing (QE).

Birmingham Chamber of Commerce Group (BCCG) said it had been important for the Bank’s Monetary Policy Committee to consider further QE but it’s now vital that the Government looks at Credit Easing (CE) through which the Treasury would, indirectly, make loans available to businesses.

Ross Gurdin, policy adviser at the BCCG, said: “We applaud the MPC for injecting £75 billion through QE. However, there is confusion about how CE would work and we urge the Chancellor to announce details of how it would work when he makes his Autumn Statement.

“We expect that CE will see the treasury purchasing corporate bonds which could inject much-needed credit into cash-strapped businesses.  This system has been used in Japan and the USA but we need to know details of how it will work here.

“It doesn’t affect government borrowing as it is linked to assets and interest will be charged so the Government could make money from it. While we would not like to see the government trying to ‘pick winners’ we feel that CE should be aimed at high growth businesses with the potential to create jobs and wealth.”

Mike Ashton, spokesman for the West Midlands Chambers of Commerce, said: “The decision to keep interest rates static will encourage companies to look to export markets.

“Figures show that the number of export documents processed in Birmingham alone for the first six months of this financial year is 14 per cent up on the same period last year and six per cent up on the second half of last year.

“However, 99 per cent of the documents we processed are outside the European community.  So companies are taking advantage of the relatively strong Asian markets, such as China.”