UK banks 'directly responsible for economic downturn'

30 August 2011

Banks in the UK have been directly responsible for a considerable part of the nation's economic decline since September 2008.

This is the finding of new research from the Office for National Statistics, which showed the action of lenders accounted for more than one-third of the slump, the Daily Telegraph reports.

The study revealed the UK economy is four per cent smaller than it was in March 2008 and 2.8 per cent less than the size recorded in September 2008.

It has been demonstrated that the contraction in banking activity since the credit crisis has accounted for one percentage point of the 2.8 per cent dip.

Although banks make up just 5.1 per cent of the UK's economic output, it was shown that they are to blame for 35 per cent of the decline.

Phillip Shaw, an economist at Investec - which was founded in South Africa in 1974 - commented: "For whatever reason, you've also got tighter lending conditions for households and small business now ... the lack of credit is acting as a drag on the economy."

By Gary Cooper

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