Wind the clock back two years. You are in a restaurant, eavesdropping on a conversation between a successful businessman and his bank manager.

After concluding the small talk, the banker gets down to business: “I’ve been looking at your financial performance and your assets. It’s clearly going well. I reckon we could lend you an extra £2m to remortgage your industrial estate. It will give you a chance to invest and perhaps take a bit of money out yourself.”

“The rate won’t be too onerous,” he continues, “and neither will the arrangement fee. We value you as a customer and we want you to keep your business with us. Is there anything else you want? Have a cigar and you must come on our next corporate shoot.”

Fast forward to now and listen to the same individuals talking. Banker: “I’ve noticed you are struggling to repay that loan, in fact you are technically in breach. The loan is now worth more than the building.

“Times have changed for you and for us; we can help you resolve the issue but unfortunately it will cost. This is what I can offer - you will have to pay a one-off fee of £200,000 for rearranging the loan and a further 100 basis-point penalty for breaching it. The rate will also have to be at least 300 points above Libor. I hope you understand. Glass of water perhaps?”

Make no mistake, this is what is about to happen. We have had a period of reckless overlending, and now we will have the opposite - overcharging dressed up as sensible, cautious banking. Bankers may be on their uppers now, but it is going to be a profitable business again, quicker than we think, and it is the corporate and retail customers who will pay for it.

Try to negotiate a loan from the banks now and the terms are onerous.

The shake-out that is taking place among the world’s large financial institutions means big banks are going to get bigger, choice will be restricted and there is a grave danger it will throttle growth in entrepreneurial Britain.

The big FTSE 100 companies with triple-A ratings will be okay. They may have to pay a little extra on their loans, but not much. It is further down, in middle Britain, where the pain will be felt. I have heard repeated stories in recent weeks of banks calling in loans, businesses being unable to raise additional capital. This will curb growth and lead to inevitable cost-cutting.

The banks blame the wholesale markets for their problems, a point we cover in great detail on pages four and five. But this is a time where banks should look at the long game. They have squandered their reputations in the past year by lending too freely. Now they must help kickstart the economy - sadly, though, I suspect the short-term gain of overcharging will prove irresistible.

A mission for Mandy

Peter Mandelson could mark his return to government as business secretary with an easy win. He could encourage Alistair Darling, the chancellor, to abandon changes which will have an impact on the taxation of overseas earnings for UK corporates. In an instant he could stop this dribble of companies moving their domiciles to more tax-friendly countries. WPP, the advertising giant, is the latest to say it will move to Dublin and at least 10 more FTSE 100 companies, from Prudential to Reckitt Benckiser, could follow, further eroding Britain’s reputation as a good place to do business at a time when the UK needs all the help it can get.

As the former EU commissioner, Mandelson is acutely aware of the competition to lure big corporates and the differing tax structures.

He could also enlist the help of Paul Myners, newly installed as City minister. Both individuals have impressive connections in business and making this swift change would show that Labour is keen to rebuild links with business.

There has been immense frustration within industry at the way Brown has been steering the economy - and here is an easy win to help turn sentiment.

Bonzer speech, mate

Rio Tinto boss Tom Albanese is at heart a mild-mannered geologist. Last week, however, he strayed into politics, making (for the head of a mining company) a hard-hitting political speech in Melbourne. Albanese warned Australians about the dangers of protectionism and the need to resist the populist appeal of economic nationalism. If you shut foreign investors out of the exploitation of the country’s phenomenal mineral wealth, Albanese said, the people who will lose out are ordinary Australians denied the stimulus foreign money and expertise can bring.

While I agree with Albanese’s premise - there wouldn’t be a British car industry, for example, without the Japanese and the Germans - I must point out that he is not a disinterested observer. The Australian competition authorities recently approved BHP Billiton’s planned takeover of Rio Tinto.

In his speech, Albanese hinted that it would be wrong for Australia to try to create a single national mining champion, saying: “There is a view circulating in Australian business and political circles that powerful global forces are at work which will see the consolidation of the resources industry into a handful of mega-companies furthering the interests of a small number of sovereign states.” This view was wrong, he said: the best champions for the country were its leading global companies – companies plural.

Meanwhile, predicting the outcome of BHP’s bid for Rio is becoming more and more difficult as the waters are muddied by the credit crisis and the global sell-off of commodities stocks. BHP shares have fallen by just under a third in the past three months, while Rio’s are down just under 40%. As it is an all-share offer from BHP, the relative declines in the prices should make BHP’s offer slightly more attractive. Rio also has falling aluminium prices and problems with its large new iron-ore project in Guinea to contend with. It’s still too close to call.

Cracking response

A few months ago I described Anglo Irish Bank as being like a building society on crack because of its excessive overlending. This prompted a series of angry legal exchanges from its po-faced lawyers. The Irish government seems to share my view. Last week it guaranteed retail deposits at its banks and Anglo Irish was one of the biggest beneficiaries. We must hope Anglo Irish is a reformed crackhead now. Over the coming months we will see some of the ill-conceived loans that got it into this mess.

john.waples@sunday-times.co.uk

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