Summary for non-specialists(50 kB)  

This 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.