Lending growth to British business is set to resume this year after falling by more than a third since the financial slump, a key study today reveals.
The influential EY Item Club forecasts a modest level of growth this year but predicts net lending to businesses is poised to rise almost 17 per cent by 2018, funnelling up to an extra £66 billion into UK companies.
The turnaround comes after six years of contraction, with corporate borrowing down by 31 per cent – £181bn – since 2008.
Alternative finance has helped plug the lending gap and is set to remain as a significant force, even as banks gear up for increased lending.
Meanwhile, the Item Club’s forecast for financial services has the asset management sector continuing “on a very strong growth trajectory”, with funds under management predicted to hit a record £904bn by the end of 2015.
UK-focused funds are expected to almost reach £1 trillion by 2016, which will be close to two-thirds of annual UK GDP for that year.
Chris Price, EY Item’s UK head of financial services, said: “While there is little doubt that traditional bank lending will find its feet again, it looks like the recent lending drought has permanently changed borrowing behaviour. The challenge for banks now will be regaining market share from the alternative finance providers who have successfully plugged the gap for the last six years.”
The Bank of England’s Funding for Lending Scheme was launched in 2012, giving banks and building societies access to cheap finance in return for lending to households and businesses, and was later revamped by governor Mark Carney with a skew towards smaller firms.
However, net lending to small businesses under the scheme has continued to decline.
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