Blow for King after money supply falls
THE amount of money in circulation in the UK decreased by £4.1bn, or 0.2 per cent, in August compared with an average monthly increase for the previous six months of £2.2bn, the Bank of England (BoE) revealed yesterday.
The Bank’s latest figures also showed the 12-month money supply growth rate fell to 1.8 per cent from 2.3 per cent in July, the weakest annual growth rate since monthly records began in July 1983.
The figures are likely to make uncomfortable reading for Bank governor Mervyn King, with one economist already raising the possibility that the BoE may have to restart quantitative easing, which has been on hold for the last few months.
Meanwhile, the BoE’s Trends in Lending report showed lending to UK businesses fell for a fifth month in a row in July. Monthly net lending to businesses contracted by £2.5bn, following a £3.2bn decline in June. Net lending to UK businesses was down 5.7 per cent on the year, compared with a fall of 7.9 per cent in June, but this was the smallest fall since August 2009.
“The BoE’s lending survey very much maintains concern that tight credit conditions are posing a significant obstacle to economic activity,” said Howard Archer, chief economist at IHS?Global Insight. “With money supply growth also faltering further in August and the economy showing increasing signs of faltering, pressure is mounting on the BoE to revive quantitative easing.”
The BoE? also noted that while credit conditions were easing for larger businesses “they remained tight for smaller firms” while most major UK lenders reported demand for credit remained subdued.
John Walker, national chairman at the Federation of Small Businesses, called for more government help for small businesses, saying many were facing an “uphill struggle”.
ALESSANDRO PROFUMO
UNICREDIT
Alessandro Profumo, one of the most colourful banking bosses in Italy, is expected to leave the bank he transformed into Italy’s largest lender.
During 13 years at the bank, Profumo, 53, took UniCredit from regional bank to pan-European player.
He is known as a pugnacious character and has threatened to quit in the past unless he got shareholder backing for his plans.
Now it seems that his reign at the lender will come to an acrimonious end at a special board meeting called to discuss management relations this afternoon.
Such is Profumo’s hold over the institution, analysts say UniCredit is at risk of being left rudderless at a time when it is struggling more than most of its peers to recover from the financial crisis.