Lending to Businesses Drops
The latest Bank of England quarterly lending figures have shown that the amount of money bin lent to UK business fell in January by £6.5bn following on from an already large fall in December of £3.4bn.
In the year ending January, lending to businesses had taken a sharp fall of 9.3%, this was the sharpest fall since the 1990s.
"Tight credit conditions remain a serious obstacle to significant, sustainable recovery," said economist Howard Archer from IHS Global Insight.
"It is evident that ongoing very weak bank lending to companies is being influenced significantly by low demand for credit in addition to restricted supply."
This also comes on the back of the government spending billions in order to try and boost lending to both businesses and individuals. There has been £200bn put into the Economy through the use of the quantitative easing process in order to provide extra lending capital.
The Bank of England has also said that there is an improving market in credit available to businesses in the UK, though admittedly more for larger companies than small. However they have also stated that the available for smaller business is ‘improving but still fragile.’
"Banks have to realise the business landscape has changed," said a spokesman from the Forum of Private Business, arguing that banks were too risk-averse and the costs of borrowing were too high.
"They need to judge businesses on their individual merits rather than taking a one size fits all approach."
Despite this however, the British Bankers’ Association has said that high street banks are still making around £500m worth of new loans to small businesses per month so long as they have ‘a good strong proposal.’
"Demand for business lending is historically low and this has led to a decrease in the overall amounts outstanding."
The UK base rate currently sits at 0.5%, but the Bank of England also added that 2.2% if the effective rate for new corporate lending.
Posted at 10:08AM Mar 20, 2010 by Marc Stenton in The Economy | Comments[0]
