Banks Are Still Lending Less To Small Businesses (GRAPH)


Banks are still struggling to lend money to small businesses, as the latest figures show that net lending is still falling.

According to the Bank of England, the stock of lending by banks to small firms has continued its four-year decline, contracting by £0.5 billion in the three months to February. However, it was a much smaller decrease than the £3.3 billion fall in the previous three months.

In its latest Trends in Lending study, the Bank wrote: "Lending growth rates for small and medium-sized enterprises (SMEs) were stronger than for businesses overall during 2009, perhaps reflecting large companies’ better access to alternative sources of finance such as capital markets.

"The growth rate in the stock of lending to SMEs has been negative for the past four years across a range of measures, though has contracted by less since the start of 2013 according to data from the Bank of England."

Howard Archer, chief UK economist at IHS Global Insight, said: "The further fall in net lending to businesses in the three months to February came despite the latest Bank of England credit conditions survey reporting that credit availability to corporates increased for a sixth successive quarter in the first quarter of 2014, with a further increase expected in the second quarter of 2014.

"Falling net bank lending to businesses during the early part of 2013 at least was clearly partly due to limited demand for credit from companies as well as many companies looking to pay down their debt.

"There is clear evidence that firms are now looking to step up their borrowing as markedly improved economic activity in recent months lifts their confidence and need for capital."

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