Business Lending Suffers Further Fall

Wed, 23 Dec 2009

Lending to UK businesses dropped by £4.8 billion in October as companies continued to focus on repaying debts rather than taking on new borrowing, according to the Bank of England.

The Bank’s latest Trends In Lending report revealed that the level of business lending was 7.6 per cent below the figure for October 2008 - the largest year-on-year drop since its records began in 1999.

The report said that net lending in general remained "subdued" in November, with many firms continuing to report concerns over access to finance .

David Kern, chief economist at the British Chambers of Commerce, said: "Dangers to the UK's productivity are reinforced by the new lending trends figures, which show that the flow of credit to business remained negative in October, with annual growth rates across all company sizes continuing to weaken."

"Access to finance remains a critical obstacle to a much-needed revival in investment ."

Howard Archer, economist at IHS Global Insight, said: "Lending to businesses is continuing to contract, thereby maintaining concerns that persistent tight credit conditions currently remain a serious handicap to sustainable, significant economic recovery."

The report added however that major UK lenders expect loan availability to the corporate sector to improve and the cost of borrowing to decline in 2010.
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