The flow of credit in the UK economy and the availability of financing to the corporate sector
AbstractThis paper analyses the flow of credit in the UK economy in the years before and after the 2008 financial and economic crisis, with particular emphasis on the corporate sector and the SME segment. It carries out a comparative flow-of-funds analysis highlighting the parallelisms and differences between the sterling and euro currency areas. It also reviews the characteristics of UK funding markets and, based on an analysis of available surveys and other evidence, discusses the extent to which credit supply and demand factors have been at play in driving the marked retrenchment in credit observed in the post-crisis period. The conclusions are complemented by econometric evidence from an estimated SVAR model identifying a long period of negative credit supply and demand shocks from 2008 to 2012. The paper also discusses how competition in the UK banking industry was impaired in the post-crisis period and how to harness the current UK institutional framework for kick-starting an SME securitisation market. Finally, a review is made of the main initiatives taken by the UK authorities to improve access to finance. Overall, the paper details the supporting evidence underlying the 2011, 2012 and 2013 country-specific recommendations addressed to the UK by the Council of the European Union to the effect that the UK authorities continue to take steps to foster access to finance.
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Bibliographic InfoPaper provided by Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission in its series European Economy - Economic Papers with number 509.
Length: 76 pages
Date of creation: Dec 2013
Date of revision:
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Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
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