Lending To Businesses Down GBP3.5bn In April

Fri, 22 May 2009

Bank lending to UK businesses slowed in April, with most loans granted used to refinance companies existing credit lines, a Bank of England survey has revealed.

The Banks "Trends in Lending" report showed that new business loan facilities from Britain’s main lenders fell to £9.1bn in April, down from £12.6bn in March.

"Net lending to businesses has remained weak, with new facilities granted reported largely to reflect the refinancing of existing lending," the Bank said.

According to the report, overall business investment has fallen by 8.4 per cent over the past twelve months, with companies in the wholesale and retail trade and manufacturing sectors hit the hardest.

It also noted that lending to small and medium sized businesses has remained particularly challenging, with approval rates falling, particularly for the smallest companies.

Howard Archer, chief UK economist at IHS Global Insight, said the fall in lending showed there is still little evidence that the Bank of England’s £125bn programme of quantitative easing is boosting credit to the wider economy.

"The survey suggests that the various policy measures undertaken by both the Bank of England and the Government to boost bank lending are yet to have a major beneficial impact," he said.

The "Trends in Lending" survey is based on lending by Banco Santander, Barclays, HSBC, Lloyds Banking Group, Nationwide and Royal Bank of Scotland .

The six major lenders accounted for around 65 per cent of business lending and some 70 per cent of outstanding mortgage lending in 2008.
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