Bank decision hailed by business group

Date: 6th August 2009

The Bank of England's decision to increase quantitative easing (QE) is likely to prove good news for small business owners, an industry group said today.

According to the British Chambers of Commerce (BCC), the programme - known as the modern-day equivalent of printing money - might also need to be extended further in future in order to meet the needs of the sector.

The Bank announced at midday that it would be holding its lending rate at its current all-time low of 0.5 per cent and increasing QE from £125 billion to £175 billion.

A major aim of these radical policies is to strengthen lending from commercial banks, which has become largely blocked as a result of the credit crunch.

Referring to the QE decision, BCC chief economist David Kern said: "This should be sufficient for the time being, but in view of the risks still facing the economy, more may be needed later in the year."

He added: "Money supply is not growing at an adequate pace, bank lending to businesses has recorded outright declines in recent months, and many viable small firms are finding it difficult to access credit."

BCC analysis also suggested that the productive sector in the UK, encompassing many small businesses, remains "very fragile", despite recent signs that the economy as a whole might be beginning its recovery from the crunch.