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Drop in total net lending to firms

LENDING to non-financial firms fell by the biggest amount in more than two years in November net of repayments although the amounts advanced to small and medium sized enterprises increased by around £140 million, according to official figures.

The £4.7 billion fall in total net lending was the biggest since the Bank of England started compiling records in their current form in April 2011 and may raise renewed questions about banks' willingness to provide credit to businesses. Net lending to non-financial companies fell by £1.1bn in October.

"The data suggests that banks have yet to become markedly more prepared to lend to businesses amid the improved economic situation and outlook," said Howard Archer, UK economist at IHS Global Insight.

Mr Archer appeared to play down the significance of the increase in net lending to SMEs in November.

Noting that lending to SMEs fell by £505m in October and £383m in September, he said it was not clear if the Bank of England's decision to extend the Funding for Lending Scheme in April to favour lending to such firms had had much impact.

The Bank of England said unsecured lending to consumers rose to £627m in November from a four-month low of £452m in October. Within the total, credit card lending rose by £0.4bn in November, compared to an average £0.2bn over the previous six months. Mr Archer noted unsecured consumer credit averaged £1.4bn a month from 2000 through to 2007. The British Bankers Association previously reported net lending to non-financial companies fell by £2bn in November, the largest decline since July.

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