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Lending to businesses falls, say Bank of England

Lending to SMEs contracted in the three months to November, statistics from the Bank of England show.

Official data in the Trends in Lending report indicated that the stock of lending to businesses fell by around £4bn over the period.

Despite Government efforts to instigate lending to business, the figures suggest slow progress on the credit deadlock.

The Bank said capital markets provided an alternative source of funding for larger companies, and net bond issuance by UK businesses was positive in the three months to November, although it was offset by negative net lending by UK-resident banks and building societies.

However, the Funding for Lending scheme and increased competition between banks was seen to have caused falls corporate loan pricing.

Matthew Fell, CBI Director for Competitive Markets, said: “Signs that lower borrowing costs are beginning to reach firms are encouraging and show that Funding for Lending is beginning to make an impact.

“However, weaker demand for finance among small and medium-sized businesses indicates that they are still lacking confidence to invest, so raising awareness of available schemes is crucial. The British Business Bank must be put into action without delay to ensure government support is visible and reaching businesses that need it most.

“Increasing mortgage lending to borrowers with smaller deposits, like first-time buyers, remains critical and the Government should look for ways to give a further boost to the housing market.”

This was posted in Bdaily's Members' News section by Tom Keighley .