Business Lending Continues To Fall

Mon, 23 Aug 2010

Businesses across the UK suffered yet another fall in bank lending in June, according to new figures from the Bank of England.

The Bank’s latest ‘Trends in Lending’ report revealed that net monthly lending to UK firms contracted by £3.5bn in June, following a £2.2bn drop in May.

The Bank noted that although much of the reduction in business loans is due to declining demand, small and medium-sized enterprises (SMEs) businesses are still struggling to secure affordable credit .

"Contacts of the Bank's network of agents noted that credit conditions for smaller businesses remained tighter than for large corporates," the report said.

"Some major UK lenders expected demand from SMEs to remain muted in the coming months."

The report also revealed that the gap between the base rate and the rates charged by lenders on loans to bigger firms fell slightly between April and June. However, there was little change on loans to SMEs.

The Bank said that the gap reflected "heightened credit risk and the relatively high cost to banks of raising longer-term funding ".
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