Banks lend to households, and cut credit to firms

While UK firms continue to be starved of credit, banks are slowing releasing loans to households. During the second quarter, households received additional credit amounting to little over 1 percent of GDP, on a net basis. In contrast, companies paid back just under 2 percent.

There is something contradictory about this pattern of lending. Households depend on their jobs to repay loans. Firms provide those jobs. If the corporate sector can not find credit, it can not investment, and growth will slow. At some point, this will feed through into wages, making it harder for households to service these new loans.

However, banks aren't terribly good at looking into these interconnections. In fact, bankers can not look much beyond this year's bonus.