Last week the Bank of England decided to inject a further £25bn into the economy as part of its quantitative easing programme. But is it helping retailers?

What effect has the programme had on the UK economy?
The latest sum came on top of the £175bn created already to kick-start the economy, yet the UK remains in recession. The Bank of England said output has fallen 6% since the start of 2008; that households have cut their spending and business investment has fallen.

But there are signs of improvement. The bank said: “A number of indicators of spending and confidence suggest a pick-up in economic activity may soon be evident.”

What difference has it made to retailers’ financing?
Limited. Large retailers may have benefited by being able to access capital markets while bypassing the banks, says Capital Economics UK economist Vicky Redwood.
Some banks have proven reluctant to lend during the recession as they rebuild their own balance sheets.

Smaller retailers have seen limited benefit. BRC director-general Stephen Robertson says: “I still hear a high level of concern from small and medium-sized retailers that financing remains very difficult and unreasonably expensive.”

What difference has it made to consumer finances?
The main effect has probably been an indirect boost to consumer confidence, says Redwood. Rising house prices, for example, are likely to make homeowners feel more optimistic about their finances.

Haven’t low interest rates had a bigger impact?
Interest rates, which have been held at 0.5% for eight months, have had a noticeable effect on the economy. Robertson says: “Consumers have benefited from mortgage rates coming down and have had more money in their pocket.”

The bank said when it launched quantitative easing that it works alongside interest rates action: “Interest rates cannot be less than zero. The MPC therefore needs to provide further stimulus to support demand in the wider economy. If spending on goods and services is too low, inflation will fall below its target.”

So is the bank’s optimism about the economy justified?
Robertson warns that people coming off tracker mortgage rates will likely “discover to their horror” that they will be paying mortgage interest rates of between 4% and 7%.
And the climate for business borrowing remains uncomfortable. Robertson says: “Low interest rates are helpful as long as the reduction is passed on to businesses and there is sufficient credit available.” For many businesses, including retailers, that is not necessarily the case.