OUTSTANDING lending to businesses by UK banks and building societies has broadly stagnated in the past six months, with the smallest firms often struggling to obtain credit, the Bank of England has observed.
The Bank's latest quarterly trends in lending report, published yesterday highlights contraction in lending to the real estate sector as a key factor weighing on overall business lending. And the Bank notes the real estate sector accounts for around 30 per cent of the existing stock of loans.
The report flags growth in lending to the distribution, professional and other services, and manufacturing sectors.
Providing an overview of lending to businesses in recent months, the report states: "Data covering lending by all UK-resident banks and building societies indicated that, over the past six months, the monthly net lending flow to UK businesses has been volatile on a month-to-month basis but, on average, was broadly close to zero."
Analysing lending trends by size of business, the report adds: "Contacts of the Bank's agents noted credit conditions had remained easy for large corporates. Contacts also reported that availability had remained reasonable for many SMEs (small and medium-sized enterprises), apart from very small firms or for those operating in certain sectors such as housebuilding or hospitality."
The report notes that UK-resident banks and building societies, overall, reported that the availability of credit for small businesses had fallen slightly in the third quarter. The Bank notes that respondents to its credit conditions survey expected demand for bank lending from corporates, particularly medium-sized companies, to increase in the fourth quarter.
Howard Archer, chief UK economist at consultancy IHS Global Insight, said: "The underlying trend in business lending seems to be showing improvement, with the headline figures being held back by contracting lending to the real estate sector."
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