Hamish McRae on the return of credit rationing

One of our most gifted business and financial communicators peers beyond the murky uncertainty of recent days to consider a world where those banks who survive the crisis are much more circumspect about how much they are prepared to lend.

“So people who are deemed bad risks, such as the self-employed and people in flashy professions, will find it harder to get a mortgage. Have a bad credit record and that will be a shut-out. First-time buyers will have to have saved for a 10 per cent deposit, or more. Small companies will find it more difficult to raise capital. Start-ups will find it harder to get going. Big companies, even profitable ones, will have to pare back their investment plans and cut their staff levels. Everything will slow down as a result.”

This is not a return to the dark ages although the prospects of a wholesale nationalisation of the bad debts of the banking system cannot totally be ruled out. But a world where credit is both harder to obtain and more expensive will come as a shock to the millions of consumers weaned on easy lending with minimum checks and balances applied. The danger is not that consumers have to become more prudent in their spending and borrowing habits, rather that small and medium sized businesses will have their ambitions curtailed by a new credit squeeze. There are already signs of a sharp downturn in planned investment spending.