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Tough borrowing environment for business

Empty purseBank lending to British businesses fell at the fastest pace in almost two years in February, according to the Bank of England. Borrowing helps small businesses set up, grow and iron out cashflow and without it businesses big and small can stagnate or even go to the wall.

The Bank of England’s report, ‘Banks’ Trends in Lending’ reveals that lending by major UK financial institutions dropped by £4bn in February.  This is the biggest drop since March 2010 and has added to the overall annual 3 per cent decrease in lending to small businesses.

This represents a massive turnaround from the heady boom days when lending to small business grew at an annual average of 15 per cent.

The report did show mortgage lending has risen over the past three months. It is believed this was partially due to first time buyers trying to take advantage of the stamp duty holiday which expired in late March.

Although mortgage lending did increase, it still remained well below the peaks of the construction boom. 
The report notes, ‘Contacts of the Bank's Agents reported that the level of activity in the housing market had risen in recent months, although it remained significantly below its pre-recession level.’

The research included data from such lenders as Santander, Barclays, HSBC, Lloyds Banking Group, Nationwide and Royal Bank of Scotland. 

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