News Column

Business lending falls at sharper rate despite continuing recovery

May 2, 2014

MICHAEL BIRD



THE BANK of England announced yesterday that business lending is still declining, and more quickly than in earlier months.


Net lending to the UK's nonfinancial firms dropped by 2.3bn between February and March, the fastest fall since November.


The continued decline in lending to companies comes despite solid economic growth in the first quarter of the year. Small and medium-sized firms were the hardest-hit in March, with a 1.1bn fall in net lending, the largest in more than a year. Despite this, the Bank continues to state that credit availability is less constrained.


"Increased credit availability to firms is not yet translating into rising net lending," said Howard Archer, chief UK economist at IHS Global Insight.


He said: "As demand for credit does pick up, it is vitally important for healthy and more balanced UK growth that all companies who are in decent shape and who do want to borrow - whether it be lift investment, explore new markets or generally support their operations - can do so, and at a non-punishing interest rate."


Other types of lending did increase during the month: unsecured credit to consumers climbed to the highest level in a year and a half, at 1.1bn.


The number of newly approved mortgages dropped between February and March, the second decline recorded by the Bank. There were 67,135 loans approved for house purchases, a drop of nearly 10,000 from January's particularly strong reading. However, the figure has risen by nearly 25 per cent since the same month in 2013, following the housing market's recovery.


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Source: City A.M. (UK)


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