Lending To Businesses Falls at its Fastest Rate in Two Years | Prepaid365

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24 April 2012

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Lending to British businesses by UK banks fell at its fastest rate in almost two years in February; figures released by the Bank of England have shown.

In its Trends in Lending report, the Bank of England revealed that annual lending to businesses is falling at a rate of 3%. This is compared to the annual growth rate of 15% before the recession.

The news comes as the Office for National Statistics (ONS) prepares to release its verdict on the UK’s economic performance in the first three months of 2012.

Many industry analysts are expecting the country to enter a double-dip recession, with estimates of economic contraction ranging between 0.1% and 0.3%.

The Bank of England’s report found that lending by the major UK banks and building societies fell by £4 billion in February this year.

This is the biggest drop in lending since March 2010, when lending by banks and building societies fell by £4.1 billion.

Over the course of the first quarter of this year, lending to businesses fell by around £9 billion – making the total outstanding stock of loans £443 billion.

“The stock of lending to small and medium-sized enterprises continued to contract,” the Bank of England report said.

“The annual rate of growth in the stock of lending to UK businesses was negative in the three months to February.”

The Federation of Small Businesses (FSB) has stated its disappointment at the findings of the report, but has said that it is not surprised by the results.

“This report underlines a problem which the FSB has been articulating for some time – that there’s not enough finance getting to the small business community and small business finance is increasingly expensive,” said Andy Willox, Scottish policy convenor of the FSB.

“Despite significant political pressure and a range of Government interventions, the report describes deteriorating levels of lending to the small business community over the last three years.”

The ONS is due to announce the official data for the UK economy, revealing whether or not the UK has fallen into a double-dip recession.

While many analysts believe a double-dip recession could be avoided, a leading think tank stated recently that it expects Britain’s economy to contract in the first quarter of this year.

The Office for Economic Co-operation and Development (OECD) has predicted that the UK economy will shrink by 0.4% in the first three months of 2012.

A double-dip recession could spell even more financial trouble for squeezed Brits up and down the country who are already feeling the pinch.

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