Business lending to grow for first time since 2008
By Tom WrightBusiness lending is still expected to grow in 2015 for the first time since the financial crisis, according to EY…
Business lending is still expected to grow in 2015 for the first time since the financial crisis, according to EY.
After five months of growth net lending figures dropped in June as companies paid off existing debt.
Omar Ali, UK Head of Banking and Capital Markets said: “Consumer credit finally turned the corner in 2014, and now business lending will hopefully follow suit.”
“The rising demand from businesses for new loans is good news for the banks, but the June drop in net lending shows how vulnerable they are to bigger businesses, with access to alternative sources of finance such as bonds, paying off overdrafts in preparation for rising interest rates.
“At this rate the rise in overall business lending this year will only be marginal.”
Bank lending to businesses peaked in 2008 at £575bn, but has dropped every year since then.
Business investment is set to rise at an annual rate of 6.5% over the next three years.
Banks have responded to the increased desire for borrowing and have contributed £103.4bn to UK business this year compared to £88.6bn in the first half of 2014.
However the sector still needs to be cautious.
Omar added: “Add further fines on the horizon, the introduction of a banking tax surcharge, ongoing regulatory reform, and the pressure to create more competition to the mix, and you can see why banks won’t be pausing to celebrate yet.”
“The sector needs to continue innovating and exerting tight controls on costs if it hopes to come even close to closing the gap with pre-crisis rates of profitability.”
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