Credit: Just what is going on?

So just who is telling the truth on credit availability?

The FICO/EFMA European Credit Risk Outlook report, released yesterday, shows that a “credit gap” looms for small European businesses in 2012.

Looking over the next six months, 31 per cent of respondents in the FICO/EFMA report forecast that the aggregate amount of credit requested by small businesses will increase, while just 13 per cent say the amount of credit extended will increase.

That is the widest credit gap for small businesses in the past 12 months.

In most European countries, it seems that the economic climate is going to shrink consumers’ and small businesses’ demand for credit.

But according to FICO, supply of credit will continue to fall faster than demand.

Contrast the findings of that report with the party line from the British Bankers Association.

"SMEs are paying back more than the new borrowing they are taking. Deposits held on accounts are also higher than loans outstanding. All of this means that, while banks have funds to lend, demand for business credit is low."

So there you have it. Banks claim that demand for credit is low so that they may not meet their Merlin lending targets; small firms say they are struggling to access finance.

The chances are that both supply and demand of credit are both in decline. But crucially, the supply of credit is shrinking faster than the demand for loans. We all know what will mean for any chance of economic growth. As for any prospect of a fall in unemployment if things remain as they are: forget it.

Photograph: Getty Images

Douglas Blakey is the editor of Retail Banker International

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How Theresa May laid a trap for herself on the immigration target

When Home Secretary, she insisted on keeping foreign students in the figures – causing a headache for herself today.

When Home Secretary, Theresa May insisted that foreign students should continue to be counted in the overall immigration figures. Some cabinet colleagues, including then Business Secretary Vince Cable and Chancellor George Osborne wanted to reverse this. It was economically illiterate. Current ministers, like the Foreign Secretary Boris Johnson, Chancellor Philip Hammond and Home Secretary Amber Rudd, also want foreign students exempted from the total.

David Cameron’s government aimed to cut immigration figures – including overseas students in that aim meant trying to limit one of the UK’s crucial financial resources. They are worth £25bn to the UK economy, and their fees make up 14 per cent of total university income. And the impact is not just financial – welcoming foreign students is diplomatically and culturally key to Britain’s reputation and its relationship with the rest of the world too. Even more important now Brexit is on its way.

But they stayed in the figures – a situation that, along with counterproductive visa restrictions also introduced by May’s old department, put a lot of foreign students off studying here. For example, there has been a 44 per cent decrease in the number of Indian students coming to Britain to study in the last five years.

Now May’s stubbornness on the migration figures appears to have caught up with her. The Times has revealed that the Prime Minister is ready to “soften her longstanding opposition to taking foreign students out of immigration totals”. It reports that she will offer to change the way the numbers are calculated.

Why the u-turn? No 10 says the concession is to ensure the Higher and Research Bill, key university legislation, can pass due to a Lords amendment urging the government not to count students as “long-term migrants” for “public policy purposes”.

But it will also be a factor in May’s manifesto pledge (and continuation of Cameron’s promise) to cut immigration to the “tens of thousands”. Until today, ministers had been unclear about whether this would be in the manifesto.

Now her u-turn on student figures is being seized upon by opposition parties as “massaging” the migration figures to meet her target. An accusation for which May only has herself, and her steadfast politicising of immigration, to blame.

Anoosh Chakelian is senior writer at the New Statesman.

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