Link to UK Economy
The way the high street banks are linked to the UK economy is in many ways. First off all the high street banks look after people’s money. There are different ways how the high street banks looks after the money. One of the ways the money is kept is through savings account. Interest is added on so by keeping the money in the savings account, the money is increased. In a addition to this the high street banks are the people who provide us with credit facilities, loans and mortgages. If these facilities and services were declined by the bank then this would cause a big problem in the economy because the spending of people would reduce and this would cause a recession in the economy.
The biggest problem would be that new business would find it extremely hard to raise start up costs, and if there are no new business being open then this means that the unemployment rate would rapidly increase because of the lack of jobs available. Furthermore the amount of services and products available would decrease because there will be less people providing products or services.
So as a result in this the high street bank’s link to the UK economy is to look after customer’s money safely. Provide money to customers who are in need of it, and this allows people to trade. This also allows individuals to have savings, but if people do decide to save money and not spend it this causes inflation, and prices and interest rates go up.
Their other link to the UK economy is to give support and advice to businesses because this creates jobs so people are set sufficient. This then prevents people relying on the welfare state.
Banks also offer credit to individuals so it can stimulate spending. When people are spending rather than saving then inflation does not occur.
Merchant Bank
Merchant banks are the subsidiary companies like Natwest. Lambard is their leasing company. Merchant banks specialize in services that support trade and commerce especially for international companies. The merchant banks provide long term loans for people who invest overseas. For example they give loans for setting up factories and call centres. The merchant bank also underwrites the issue of shares. This means that the shares that aren’t bought the merchant banks buy them. They act as an issuing house for new shares on the stock exchange. Merchant banks do not offer services to the general public like the high street bank does.
Like the high street bank the merchant bank does give advice to businesses that have problems. They help businesses launch onto the Stock Exchange. They do this buy providing loans, guidance, and advice. The merchant banks help support the business which will then help support the growth of the economy, and this therefore leads to a wealthy economy.
Link to UK economy
The merchant banks link to the UK economy is that they support businesses which enable companies to operate. When this happens this provides employment, this helps them with tax. The tax that is raised gives support to things such as education, health, and the welfare state. The merchant bank also supports foreign trade. This is done so it helps businesses import and export.
When this is done this improves the wealth of the country. Another link to the UK economy is that the merchant banks support new businesses by underwriting the issues of shares onto the stock exchange. This helps companies expand, and when companies expand more jobs are created and the government then raise tax. When there is an expansion of companies the most important factor is that the consumers have more choices.
Building Society
A building society offers similar services like a bank. Examples of building societies are Nationwide and Coventry building society. A building society offers products such as Loans and Mortgages. Building societies are known as Mutual Societies. A building society is owned by the people who save or borrow with them. Any of the profits the building society get are to be shared out with the customers.