LENDING to companies by the major UK banks fell again in February, following a rise in January, the latest industry figures have shown.

On a net basis, taking into account repayments, lending by the big UK banks to non-financial businesses fell by £1 billion in February. This drop followed a £1.1bn rise in January, which had been the first increase since last August.

The BBA said that larger companies had "notably been making use of capital markets" to raise finance in preference to bank borrowing, while the real estate sector had been actively reducing its bank borrowing.

It added that growth in lending to the manufacturing, and transport, storage and communication sectors had been offset by net repayments from construction, accommodation and food services, and wholesale and retail firms.

Howard Archer, chief UK economist at consultancy IHS Global Insight, said: "While February's modest drop in net lending to businesses looks disappointing, the overall trend in the first couple of months looks firmer. It may also be that a number of firms are currently limiting their borrowing due to increased caution about the outlook given May's looming General Election, where the outcome is highly uncertain."

He added: "It is notable that business investment faltered in the latter months of 2014, after earlier strong gains. This relapse in business investment was substantially due to a fall in investment by oil and gas extraction companies amid sharply weakening oil prices but there may well also have been generally increased caution over the business environment likely to be prevailing after the General Election."