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Business lending tumbles again

THE rate of decline in lending to businesses by major UK banks accelerated further in April, industry figures have shown.

The figures, published yesterday by the British Bankers' Association (BBA), showed outstanding lending to private non-financial corporations tumbled by a net £2.3 billion last month.

This was the sharpest decline in any month since July 2013, exceeding the £2.1bn drop in March. And the fall in April was more than double the average monthly drop of £1.1bn in the preceding six months.

The BBA noted the part played in the fall in lending to businesses by companies in the real estate sector, which had been reducing their borrowings. It cited more positive figures for lending to manufacturers.

But Howard Archer, chief UK economist at consultancy IHS Global Insight, viewed the fall in lending to businesses in April as disappointing.

He said: "The Bank of England's regional agents' May report offers some clues as to why bank lending to businesses remains weak. Although the regional agents reported that demand for credit had increased, they also reported that 'it remained sluggish, especially among small and medium-sized enterprises, as trust in banking relationships remained weak'."

Mr Archer added: "Even so, there is evidence that many firms are now looking to step up their borrowing as sustained markedly improved economic activity lifts their confidence and need for capital.

"As demand for credit does pick up, it is vitally important for sustainable, 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."

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