The Governor of the Bank of England, Mervyn King has called for the banks to be given incentives, to encourage lending to Small and Medium Enterprise in the UK. Speaking at a dinner being held for the North West Institute of Directors, King said he believed that the next months would see the level of inflation fall as the effect of the increase in VAT, huge energy price increases and rising import expenses ease.

According to King, the injection of £75 billion by the banks into the economy would increase demand overall, benefiting all businesses. However, he did express concern when acknowledging that small businesses were reliant on the banks for finance. He said:

“And there is special concern about their ability to obtain credit- I share that concern based on my experience from meeting many such firms during visits to all parts of the United Kingdom and hearing reports from the Bank’s regional agents.”

King has said that he considers incentives for banks to be the best way to encourage existing financial institutions to increase lending to SMEs. The year 2011 has been described as “the year of reluctant recovery” by the Bank’s Governor, with growth of the economy disappointing in the UK and overseas. He went on to acknowledge the drop in confidence for businesses and consumers, but adds that the governments must act together to resolve the global problems, just as they did in 2009. Officials from the Bank of England visited businesses across the North West region of the UK.

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