Comment: Another step towards backing UK recovery

By MARTIN FLANAGAN
Published on 15/06/2012 00:00

BANK of England governor Sir Mervyn King and his colleagues clearly believe more needs to be done to help revive the economy than simply keeping interest rates low and pumping more money into the economy through quantitative easing.

The Bank has teamed up with the Treasury to provide a new plan that aims to answer the persistent complaints of weak lending to businesses..

A new “funding for lending” scheme could be active in a few weeks, the idea being that the Bank would provide extra liquidity to banks on a short term basis, crucially at a discount to market rates, in order to get things moving.

To protect the taxpayer, and in recognition of the long-term nature of the lending, the Bank and Treasury would demand much greater banking collateral against the loans. That collateral would essentially be the loans the banks made with the money to the real economy. No danger of any new banking-fuelled property bubbles. The gratifyingly unsubtle “funding for lending” label for the new scheme should also complement existing government schemes.

It certainly won’t hinder a stuttering economic recovery that is hamstrung by a mixture of depressed UK consumer spending and eurozone headwinds against business investment and exports. King made the point last night that prospects for recovery look worse now than they did two years ago when we fondly thought we were moving out of recession.

Instead, it looks like business has to be nursed back to health through an incremental variety of government and central bank measures.

None of them is likely to be a silver bullet but the Bank looks like it can at least provide cheaper funding for banks than is available in nervous wholesale markets.

For a sport, it’s an awfully big business

THE jaw-dropping £3 billion paid for the new three-year television rights deal for the English football Premier League is yet further evidence of how increasingly the riches in the game look beyond the comprehension of the man in the street.

It is a breathtaking 70 per cent leap on the existing deal between the League, BSkyB and American broadcaster ESPN.

To place the latest deal in context, when the Premier League kicked off in the 1992 recession the television deal struck was worth just £60m a year.

Sky has been credited, rightly or wrongly, with enhancing the value of the league and contributing to the quality of the product.

But the staggering sums now being paid, compared to the vastly more modest outlay in Scotland, is also adding to worries over clubs’ finances as most of the money flies straight into the pockets of the players who can expect another surge in their already inflated salaries. Given the enthusiasm to buy up television rights to the most popular league in the world, another step-change in the price paid can be expected at the next auction.

BSkyB claims the lion’s share of the latest deal, but the emergence of BT as a challenger channel tells us something more about the way television is evolving. The raising of the ante this time around shows how valuable live televised sport is to media and telecoms groups.

Sky, in particular, has used soccer as its storm trooper to open the way for the promotion of other TV offerings. But converging techologies are throwing the various sectors into direct competition with each other.

BT has shown a limited range of matches on the internet through BT Vision but securing more matches marks its entry into the big league.

Many had thought Arabic news channel Al-Jazeera might be the dark horse to challenge Sky’s established position on live Premiership football, but it was not to be.

It looks a shrewd move by BT boss, Ian Livingston, who is paying £246m a season to show 38 live matches.

In the scheme of things, it is not a big financial outlay for BT. And yet it shows the group is thinking laterally.

A key City focus in recent years at the group has been BT’s relentless focus on costs but this move shows an interest in expanding the vision, literally and metaphorically, of the former state-owned business.

And, at the very least, the move heralds a very strong advertising/marketing exposure for the rest of the business.