Bank of England Governor Mervyn King has condemned banks for not lending sufficient cash to small and medium-sized businesses.
Mr. King told MPs on the Treasury Select Committee that it was 'heartbreaking' to see so several small and medium-sized businesses tumbling because banks turned down their request for the essential cash they need to function.
He said that the Government’s existing lending agreements with lenders were not helpful as they set targets for gross lending, whereas it is net lending that matters.
He also warned that sustained economic recovery for the country was uncertain despite the fact that recent figures showed a jump in output.
Speaking on the topic, he said, "The wider economic problems around the world underline the fact that we can't be confident that the recovery in demand, output and employment here in the UK will be sustained."
Recent official figures showed more than expected 1.1 per cent growth in country’s gross domestic product during the second quarter.
The Bank of England’s key interest rate is still at its record low of 0.5 per cent as it fears that any increase in interest rate could jeopardize economic recovery.
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