Happy Christmas for German businesses while British SMEs get a lump of coal

Civitas, 27 December 2010

Last week Civitas released a report detailing the successes of the German and Swiss banking systems. In particular the success of the German savings banks and the Swiss cantonal banks allowed German and Swiss businesses to continue to access credit throughout the recession. The benefits of this have been evident in 2010 as both countries recorded exceptional growth. This is in contrast to the UK, where businesses report constrained credit conditions and the Government futilely attempts to chastise the major banks into lending more to British SMEs.

Recently released by the German think-tank Ifo is further evidence to support the conclusion that German businesses are benefitting from far more propitious credit conditions than their British counterparts. Their annual Business Survey and Credit Constraint Indicator has shown that German firms are increasingly confident about business conditions in the country and feel that their access to credit has become easier through 2010.

The graph above is of data gathered by Ifo. It is clear that all types of firms have felt that credit conditions have significantly improved through 2010. The country’s local savings banks, which cover around 30% of the German business market, are the country’s most important provider of credit, especially for SMEs. The reasons for their success during the crisis, as well as the success of the Swiss cantonal banks are detailed in the Civitas report. Importantly, this evidence from Ifo provides a further indication of the success of the German banking system in weathering the crisis and continuing to fund businesses that power the German economy. Isn’t it about time the British Government thought about how British banking could be reformed to better serve British companies, who will need to have access to credit if the country is to avoid suffering greater unemployment and reduced growth in 2011?