The great jolt to confidence caused by last autumn's banking crisis, and our collective uncertainty about what the future holds, has prompted vast numbers of us to endeavour to reduce our indebtedness.

As Stephanie has mentioned, official statistics indicate a sharp increase in the rate of saving by British households, after years in which we accumulated unprecedentedly large debts.

Suddenly that all-time record 175% (or so) ratio of household indebtedness to disposable income feels like a dreadful millstone.

Of course, thanks to the munificence of the Bank of England in slashing Bank Rate and creating £200bn of new money, it is not the interest payments that are bearing down on us, but the overall indebtedness.

The principal on the household debt (still greater than our GDP) may seem unbearable at a time when expectations for growth in our earnings and in the value of our assets have been very considerably diminished.

That said, it is not impossible that rising interest rates could at some point put a squeeze on consumers' capacity to spend, as the Bank of England has helpfully pointed out in its latest Financial Stability Report.

This shows that if inflation bubbled up and the Bank's Monetary Policy Committee felt obliged to increase interest rates to the levels of just a few years ago, households would be paying out eye-watering amounts of their earnings to service the interest on their debts (with Bank Rate at 5%, households on average would be allocating between 11% and 14% of their income to interest payments, which would be a very high proportion by all historical standards).

That said, and as the minutes published this morning of the last MPC's last meeting make clear, there's no great likelihood of Bank Rate rising sharply any time soon.

However bosses of retailers tell me that they are not expecting 2010 to be a return to boom times. And no-one should expect a great splurge of consumer spending to power us out of our economic torpor.

So what will be the source of the UK's economic recovery?

Well it's plainly not going to come from the public sector, with government indebtedness rising at an unsustainable rate and the main parties engaged in an argument about the scale and pace of spending cuts, not the inevitability of such cuts.

Any oomph would probably have to come from private-sector businesses, especially investment by them.

So just how likely is it that industry and services will be our salvation?

Well let's start with the anecdotal evidence.

As is my wont this time of year, I've asked a bunch of business leaders - in an informal way - what they expect from 2010.

None were preparing for a massive increase in demand for their stuff. And although they assumed that the recession was over in a technical sense, they did not expect the recovery to feel massively better for themselves or their staff than the depressed conditions of the past year or so.

On employment, they were not prepared to commit that there would not be further redundancies.

Some admitted that they had been "hoarding" labour, keeping people on in the hope of better times - but there could come a moment (perhaps early in the new year) when those hopes were dashed and there would have to be a further round of job losses.

As for investment, business leaders said they were behaving (unsurprisingly) rather like households: they would rather reduce indebtedness or accumulate cash, than make substantial financial commitments.

Those views are consistent with the Bank of England agents' survey [360 KB],
which describes the outlook for investment as flat. It paints a picture of businesses that plan investment increases being offset by those preparing for cuts, with small and medium size businesses tightening belts more than big ones.

That's not particularly cheering, coming - as the Bank points out - after a fall in investment spending in the UK which has been significantly greater than during past recessions.

For those of a pessimistic cast of mind, these trends are probably too reminiscent of the sustained falls in business investment that prevented Japan from growing for more than a decade.

And as in Japan, it is the hard numbers on lending to business that should probably be given greater weight than what business leaders actually say.

In Britain, the credit statistics are dire.

The annual rate of lending to business has been falling at an ever greater rate, month after month, to a decline of 7.6% in October (the last month for which figures are available).

This squeeze is a mixture of less credit being available, especially from non-British lenders, and of reduced demand for credit.

It is true that some businesses are choosing to issue bonds and new shares rather than borrow from banks. However the net overall supply of finance to business remains flat, even including the proceeds of those fund-raisings.

Also, certain really important sectors - notably manufacturing - have raised next to nothing from capital markets while also massively reducing their borrowing from banks.

There was a tiny glimmer of recovery in lending just by British banks to business reported for November by the British Bankers' Association.

However this figure may be a rogue, since it is skewed by a slightly odd bounce in borrowing by "real estate, renting and other business services", while manufacturers continue to borrow less.

My take on what's happening goes like this: stronger businesses are frequently choosing to save rather than spend; banks are refusing to provide new finance to weaker businesses: and the very weakest businesses are being kept on life support by banks which may not wish to endure the political and financial pain of putting too many of them into administration all at the same time.

As of now, an investment-led British economic revival does not look imminent.

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For all the furore about Alistair Darling's bonus super-tax, and for all the disclosure overnight by Deutsche Bank that it will spread the pain across all staff and shareholders around the world and not just in the UK, there is a much bigger threat to business-as-usual for banks and bankers.

The international rulemaking body for the banking industry, the Basel Committee on Banking Supervision, has proposed a series of reforms that would change the nature of banking in a profound way (Strengthening the resilience of the banking sector [282KB PDF]).

Some will mutter about stable doors and horses: it was the inadequacy of the existing Basel rules which provided dangerous incentives to banks to take the crazy risks that have mullered the global economy.

But be in no doubt. Although its reform paper, "Strengthening the resilience of the banking sector", may seem technical and obscure, it would turn a particular kind of high-paying, securities trading, global megabank - the institutions that created and defined the boom-and-bust conditions of the past decade - into an endangered species.

If I were running Barclays, or Deutsche Bank, or JP Morgan or even Goldman Sachs, I would be more than a little anxious about the cumulative impact of the Basel Committee's recommendations on the additional high-quality capital that banks would be required to hold, the liquid assets they need to accumulate and also - oh yes - the rewards banks can distribute to employees and shareholders.

Mr Darling's raid on their cash boxes looks trivial by comparison: it's just a one-off; Basel is forever.

The Basel reforms would make it prohibitively expensive for banks to do all that wheeling and dealing in securities and derivatives that yielded bumper profits and bonuses in the boom years and brought the world to the brink of depression last autumn.

Perhaps most significant would be the proposal to limit the ability of banks to pay out bonuses to staff and dividends to shareholders as and when their respective capital resources approach the minimum allowed.

The nightmare before Christmas for bankers is the tape on page 70 of the report, which sets out the new global incomes policy for them.

It will be seen by bank boards and owners as an infringement of their basic right to pay themselves what they want and when they want.

The consequences would be profound not only for the banking industry but also for the economy - which is why they will be phased in over years.

They are likely to mean that far less credit to households and non-financial businesses will be provided by conventional banks, because the cost to banks of providing credit in any form will rise.

They are also likely to force a mass exodus from banks of the more entrepreneurial, brainier, traders and financial engineers - who may either go for real jobs in the real economy (is that such a terrible idea?) or will create all manner of new-fangled financial institutions, which won't take retail deposits, won't be banks in a technical sense, and won't be subject to such onerous regulation and supervision.

Yes, the Basel plans almost certainly mean there'll be another great sprouting of hedge funds and alternative investment vehicles.

You can decide whether that's a good thing or a bad thing.

By the way, if you want a bit more granularity on how and why an ice age just arrived for banks and bankers, look no further than the recent Financial Services Authority discussion document on reinforcing the capital strength of British banks and also today's Financial Stability Report from the Bank of England [3.95Mb PDF].

The FSA estimates that financial institutions in the UK will need to raise an additional £33bn of capital to meet new rules out of the European Union designed to reduce the riskiness of their trading activities and of securitisation (of turning loans into tradeable assets).

Now the big point about that £33bn is that it does not include the additional requirements that will be imposed by the new Basel framework. The £33bn is just a beginning.

Which gives the banks two choices.

They can try to raise the £33bn and whatever else is subsequently demanded of them. Or they can massively reduce their trading activities - which seems the more likely outcome.

Can they turn to the Bank of England for a shoulder to cry on.

Not likely.

It makes this helpful point to banks which - it agrees - are still chronically short of capital: "reducing staff costs [at banks] by around one tenth and dividend payout rates by around a third would allow UK banks to increase retained reserves by close to £70bn over the next five years".

Crikey: five years of stunted bonuses! Grown bankers will weep.

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For British Airways' owners and managers, today's court injunction against the Christmas strike is temporary relief not proper recovery: BA still needs to resolve its dispute with cabin crew over staffing levels and pay.

The airline cannot really escape the painful truth that many of its people feel spurned and alienated. Even if there were procedural irregularities in the ballot, staff voted decisively to strike.

So it's one more problem to sort, for a business that often seems addicted to crisis - many of which are in the territory of industrial relations - but somehow keeps functioning.

Most of us however would have had something of a nervous breakdown, confronted with quite the challenges its management is currently grappling.

Quite apart from managers' assessment that the productivity of cabin crew is well below that of competitors, BA is struggling against a collapse in revenues and a massive pension deficit.

In just the first six months of this year, BA's sales fell £650m - which are the worst trading conditions it has ever experienced.

And at a time when it is incurring huge losses, it has to find the funds to fill a huge hole in its two pension funds - which it earlier this week disclosed as £3.7bn - bigger than the market value of the business.

That is a real debt, which BA has to honour - and the hole may well turn out to be substantially bigger, because the Pensions Regulator has said it believes the airline should use more conservative assumptions when measuring these deficits.

It is no exaggeration to say that BA's future may hinge more on the Pensions Regulator's final verdict than how it finally resolves its argument with cabin crew.

BA believes that its best hope of coping with prolonged economic turbulence is to marry the Spanish airline Iberia, but Iberia has a right to dump BA at the altar if it perceives the pension fund deficits to be unbearably huge.

BA seems confident that it won't be jilted - presumably because it assumes the Pensions Regulator would not wish to be seen to be undermining the supposedly happy-ever-after nuptials.

But it is important to note that Iberia's positive noises about the deficits relate only to the numbers agreed by BA and the trustees of the schemes, which is a bit like giving a verdict on the pleasantness of a flight long before the plane has landed.

Update 1635: And to compound BA's woes, the uncertainty of whether and when there may be a strike will dissuade many from booking with BA in the coming weeks.

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