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Banks cut lending to business by £900m last month

HIGH street banks cut lending to non-financial companies by another £900 million net of repayments last month, in spite of longstanding official efforts to boost the supply of credit to firms.

Figures compiled by the British Bankers Association show there was a big increase in the amount of business lending members took out of the economy in February compared with preceding months.

High Street banks cut lending by £300m net of repayments in January and by a monthly average of £500m in the six months to February.

The figures may spark renewed concern about whether banks are doing enough to support businesses as the UK recovers from a long economic downturn.

Howard Archer, UK economist at IHS Global Insight, said: "It is vital for healthy and more balanced UK growth that all companies who are in decent shape and who do want to borrow... can do so, and at a non-punishing interest rate."

Mr Archer said he hoped the Bank of England's decision to focus the Funding for Lending scheme on businesses and to end support for mortgage activity had a significant impact.

He noted the last survey of credit conditions by the Bank of England reported a "significant" increase in credit availability to corporates in the fourth quarter of 2013.

Businesses may want to borrow more to capitalise on the economic recovery.

The British Bankers Association said: "Borrowing demand from businesses is improving, with manufacturers, wholesale and retail sectors having expanded their borrowing from a year ago."

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