Pressure on Bank as bank lending slumps

A FRESH decline in lending by the UK's banks last month has piled further pressure on the Bank of England to boost money supply.

The British Bankers' Association (BBA) yesterday revealed that its members approved just 31,767 mortgages last month, down from 34,219 in July and the lowest level since April 2009. The figures come just days after the Council of Mortgage Lenders revealed lending had reached a ten-year low in August.

Lending to businesses also fell last month, according to the BBA, although the 1 billion decline was below the average monthly fall of 1.3bn for the previous six months.

Howard Archer, chief UK economist at IHS Global Insight, said the figures indicated that tight credit conditions remained an obstacle to economic activity.

"This is even allowing for the fact that ongoing muted bank lending to companies is being influenced significantly by low demand for credit in addition to restricted supply," he said. "Lack of access to credit for smaller businesses remains a particular concern."

Archer added that the downbeat data would fuel expectations that the central bank may expand its quantitative easing programme in a bid to stave off a double-dip recession.