Concrete action needed to boost productive investment: Positive Money response to new productive investment working group

London, 20 November 2020 – The Treasury, the Bank of England and the Financial Conduct Authority will be convening an industry working group to facilitate investment in productive finance. Fran Boait, executive director of Positive Money, welcomed the announcement today but called for concrete action to guide investment towards the productive sustainable investment the real economy desperately needs:

“For too long the UK economy has been held back by the majority of bank lending going towards property and financial markets rather than the productive investment in the real economy desperately needed to level up regions and boost incomes.

“Now more than ever we need concrete action to guide lending towards productive investment to support a sustainable recovery and a fair green transition. Policymakers should look to introduce modern forms of so-called ‘credit guidance’, which were effective in steering lending towards more productive ends for much of the twentieth century.”

Notes

1. More details of today’s announcement can be found here: https://www.bankofengland.co.uk/news/2020/november/hmt-boe-and-fca-convene-working-group-to-facilitate-investment-in-productive-finance

2. Positive Money called for a joint commission to design a framework for ‘credit policy’, to guide bank lending towards the productive economy in an October 2019 report: https://positivemoney.org/seekinglegitimacy/

3. Economists such as Josh Ryan-Collins and Frank van Lerven have demonstrated how credit guidance played a crucial role in facilitating productive investment in the 20th century: https://www.ucl.ac.uk/bartlett/public-purpose/publications/2018/nov/credit-where-its-due

4. In the decade since the 2008 crash, only around 10% of lending has been productive, while more than half (55%) of lending went towards mortgages and around a fifth (18.7%) went towards financial markets, both of which mainly serve to inflate asset bubbles: https://positivemoney.org/2018/06/how-has-bank-lending-fared-since-the-crisis/

5. A joint-letter coordinated by Positive Money and the New Economics Foundation, signed by 125 experts and published this week, called for the Chancellor to give the Bank of England new powers to steer more lending towards productive investment to support a fair green recovery and transition: https://positivemoney.org/2020/11/sunaks-green-finance-plans-come-under-fire-from-experts-press-release/

6. Positive Money campaigns for a money and banking system which supports a fair, democratic and sustainable economy. Set up in the aftermath of the financial crisis, Positive Money is a not-for-profit company funded by charitable trusts and foundations, as well as small donations from its network of over 65,000 supporters. https://positivemoney.org/

7. For more information or to arrange a briefing/interview with a spokesperson please contact press@positivemoney.org.uk or Simon Youel on 07817765517