Record slump in lending to firms revealed by BoE
Data released by the Bank of England showed that lending to non-financial firms plunged by £5.5 billion in June, marking the sharpest fall since records began in May 2011. This followed an increase of £818 million in May.
The slump was driven by a dramatic £5.8bn downturn in loans and overdrafts extended to larger companies. In contrast, lending to small and medium-sized businesses increased by £353m, up from £130m the previous month.
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Hide AdAdam Marshall, executive director of policy and external affairs at the British Chambers of Commerce, said: “It is concerning to see lending to businesses contract so sharply, which is a marked acceleration of the overall trend we’ve seen over the past five years.
“While we welcome the moderate growth seen in small business lending this past month, we must ask whether we can achieve the levels of business investment that the UK economy needs without bank lending playing a stronger role.
“There are important questions about both the availability of bank finance, and companies’ appetite for that finance, that still need to be answered.”
Howard Archer, chief UK and European economist at IHS Global Insight, said the contraction in lending could be explained by the fact that larger firms have been turning to capital markets rather than banks to meet their financing needs.
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Hide AdHe said: “It is vitally important for the UK’s ability to generate sustained balanced growth and to lift productivity that all companies who are in decent shape and who do want to borrow can do so, and at a non-punishing interest rate. This applies to all companies, whatever their size.”