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Business lending by UK banks declines at sharp rate

THE pace of decline in lending to businesses by major UK banks accelerated sharply in March, figures have revealed.

The figures, published yesterday by the British Bankers' Association, showed outstanding lending to private non-financial corporations tumbled by a net £2.1 billion in March, to stand at £277bn.

This was a much sharper fall than the £676m drop in February, and was the steepest decline in any month since July 2013. The drop in March was also much greater than the average decline of £510m over the previous six months.

A continuing contraction in lending to property companies was highlighted by the BBA, which noted that borrowing by manufacturers in recent months had been up on a year earlier.

The BBA said: "The stock of borrowing by non-financial companies was £281bn at the end of 2013 and, though lending continued to contract overall in the first three months of 2014, a significant element of that reflects an ongoing contraction in lending to real estate.

"However, annual growth in borrowing by manufacturers has been positive over the past few months, and wholesale and retail trade is also showing some signs of growth."

The banking industry body declared that borrowing demand from businesses was improving slowly.

Howard Archer, chief UK economist at consultancy IHS Global Insight, said: "The BBA reported that net lending to non-financial companies disappointingly continued to fall in March, with the rate of decline actually picking up markedly to its sharpest since July 2013."

He added: "The increased fall in net lending to businesses in March comes despite the last Bank of England credit conditions survey reporting that credit availability to corporates increased for a sixth successive quarter in the first quarter of 2014, with a further increase expected in the second quarter of 2014."

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