Lending is not happening

Watching This Week last night where one of the guests was the chef Anthony Worral Thompson, I was struck by something he said. He was talking about how he has had to close some of his restaurants and make numerous people redundant due to the credit crunch.

He explained how during the good times he ran things very tightly and did not need much credit, he only expanded and opened new restaurants when he had the capital from profits from his other places to do so. He said that had he needed to, he was sure that 18 months ago he could have gone to a bank and got a couple of million pounds for more rapid expansion, however now when he needs only a tenth of that (£200,000) to tide him over and help get through the recession no bank would touch him with the proverbial bargepole.

He was asked if in his opinion the pressure that the government claims it has put on the banks to lend has had any effect on the ground and in AWT's opinion the answer is absolutely not. This is anecdotally what I am hearing from all over the place.

Now, I know that dining out is one of the things that suffers during a recession, however I am sure AWT knows his business and if he thought that a short term loan could help get through the current problems and hence safeguard jobs and businesses until we get through to the other side of the recession then surely that is better than all those jobs and businesses being lost and the knock on effect and cost to the taxpayer of lost taxes and benefit payments?

If a well known and hitherto successful celebrity chef and businessman cannot even get a sniff of a relatively small amount (in business terms) of credit, then this says to me that the government has utterly failed in its attempts to free up the credit market.

I have read in a few places that the nuclear option of nationalising the banks completely may have to happen if credit does not start flowing again soon. I previously thought this was fantasy but I am not so sure now. All the banks seem to be paralysed with fear. It is almost like they are sufferring from collective Post Traumatic Stress Disorder and seem incapable of doing collectively what would start to ease this crisis. Perhaps the state does need to step in and do it for them if they won't save themselves.