Lending to businesses continues to fall

19 April 2013

New data released by the Bank of England shows that lending to businesses fell by £4.8 billion in the three months to February.

The fall in business ending accelerated from an annualised rate of 3.6 per cent in December and 4.0 per cent in January.

Interestingly, I was talking yesterday to a banker at our seminar held in Bromley who is involved in the lending band £1m to £25m and he was saying that the banks are generally willing to lend but there is a lack of demand.  Given the problems that debt has brought in the last few years it is not surprising that some small firms are not willing to borrow money given there does not seem to be an end in sight to the flat lining economy.  However, the Bank of England’s latest Credit Conditions survey said that “credit demand was expected to increase across all firm sizes in the second quarter, with significant increases expected for small and large companies”.  I am not sure what they think will be the driver for this??

Overall, net lending fell by £2.8 billion after a £0.3 billion decline in January, according to the central bank’s Trends in Lending report published today.

The Bank of England and the government set up the FLS in August 2012 to encourage banks to lend more to businesses and individuals but recent data has shown that it has not had a positive impact on lending to businesses.

Perhaps the new incoming Governor will have some fresh ideas!