Net lending up for first time since January

Lending to British companies rose last month for the first time since the start of the year in a sign that business confidence may be improving as the economic recovery gathers pace.

Figures from the British Bankers’ Association (BBA), released yesterday, showed net borrowing by non-financial firms edged £172 million higher in June against a £2.7 billion net repayment in May.

The BBA said that the data signalled progress in the wider economy. Statistics director David Dooks said: “Second-quarter gross domestic product (GDP) is expected to have strengthened and as economic conditions improve the banks are providing the finance to help growth.”

The data fuels hopes that the Bank of England’s Funding for Lending Scheme is starting to have a positive impact after it was extended in April and tweaked to boost small business lending.

Howard Archer, chief UK economist at IHS Global Insight, said: “The small rise in bank lending to businesses in June may be a sign that companies are starting to step up borrowing as recently-improving economic activity lifts their confidence and need for capital.”

But the BBA added that net lending to businesses continues to fall on an annual basis as large firms are increasingly turning to equity and bond markets for funding, while small firms are preferring to save to pay for expansion.

Britain’s economy is expected to have continued growing in the second quarter when official figures are published tomorrow.

SCOTT REID