LENDING to businesses by the major UK banks rose in October on a net basis that takes into account repayments, new figures from the British Bankers' Association reveal.
It is the first such monthly increase since May.
The BBA figures, which take in Royal Bank of Scotland, Lloyds Banking Group, Barclays, HSBC, and Santander UK, show the stock of lending to non-financial companies by the major UK banking groups rose by a net £247 million in October to £295 billion.
This monthly rise, while modest in the context of respective falls of £1.46bn and £991m in August and September, was only the second increase this year. It was also in stark contrast to an average monthly fall of £1.29bn during the six months to September.
It was viewed by Howard Archer, chief UK economist at consultancy IHS Global Insight, as a possible sign the Bank of England and UK Government's Funding for Lending (FLS) scheme might be beginning to bear fruit.
This £80bn scheme offers funding to banks at below-market rates, with financial incentives to encourage them to lend.
Mr Archer said: "While lending to non-financial companies in October is still extremely low and not too much should be read into one month's data, the small rise could be a first tentative sign the Funding for Lending scheme is starting to have some positive impact in supporting bank lending to companies."
Some firms continue to report trouble in securing loans at all, or in lining up borrowings with acceptable rates of interest and arrangement fees.
Banks cite a lack of demand for borrowing from businesses in explaining weak net lending figures.
Mr Archer said: "It needs to be borne in mind that low lending levels to companies have reflected demand as well as supply factors.
"There is low demand for credit, with many companies wary about borrowing and investing in the current difficult economic environment ... Many companies are looking to pay down debt."
He cited the large and increasing number of banks signing up to the FLS and the fact bank funding costs had fallen.
He added: "How much companies want to borrow remains questionable.
"But it is important for UK growth hopes that all companies who are in decent shape and who do want to borrow – whether it be to support their operations, lift investment, explore new markets – can do so, and at a non-punishing interest rate. This applies to all companies, whatever their size."
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article