Is the Credit Crunch over?

The banks are reporting high profits, and house prices are on the up - does this mean the credit crunch is over?
Not according to the Bank of England who have expanded the quantitative-easing program in a step that implies that further measures are required to get the economy back on track. By contrast, the European Central Bank has taken a more optimistic approach believing that the Euro economy is gradually correcting itself. Both banks have left their base lending rate unchanged.
High street banks have started to behave as if the recession is over, but whether this is leading to them extending significant amounts of credit to borrowers again is yet to be made clear. Estate agents are also keen to publicise the fact that house prices are on the up again, but a short-term rise in prices, may cause a mini-peak if significant amounts of sellers rush to flood the market with properties.
What is it then that makes the BOE so cautious? Possibly the fact that bank revenues are not being converted into lending for businesses, possibly the fact that despite a recovery in consumer and business confidence, the UK unemployment figures are set to rise after surveys revealed the following statistics:

• One firm in ten (of the 450 surveyed) confirmed certain redundancy plans yet to be actioned
• Four out of ten are considering making job cuts
• The Chamber of Commerce is set to announce unemployment figures close to 2.5 million and experts are predicting a possible peak of 3 million unemployed this year.

Even if house prices are going up and banks are reporting billions of pounds of profit, the continuing unemployment trend will require significant investment if it is to be 'bucked'.
Businesses who are not used to having to make redundancies or lay workers off may have been slow to respond to a drop in orders, the effects on these businesses will take longer to trickle through to the economy and it could be months and months before they are forced to take action. The smart ones will have to move quickly, the less smart may end up with closing down entirely if they do not cut their wage bills to suit the orders coming in.

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