Finance · 3 August 2015

Business lending to grow for first time since the financial crisis

Rising business investment should be a boost to the UK's productivity
Rising business investment should be a boost to the UK’s productivity
The latest industry figures have indicated that business lending is expected to grow in 2015, for the first time since 2008.

The EY ITEM Club forecast for financial services reflected that after five months of growth, net lending figures dropped in June with large corporates paying off debt.

Growth will only be 0.25 per cent, but the lending measure peaked in 2008 at 575bn and had been underthat every year since. The 4.3bn of extra lending banks offered in the first five months of 2015 should result in a year-on-year rise for 2015, according to the economic forecasting group.

with the economy growing at a steady pace and business investment set to rise at an annual average of 6.5 per cent over the next three years, the forecast suggests that the days of lending contraction are in the past, it said.

The rise in business investment is seen as instrumental to helping the UK’s productivity problem, though as official figures showed a 5.5bn decline in outstanding business lending for June, there were lingering doubts as to whether the financial sector was ready to back the corporate sector.

Omar Ali, EY UK head of banking and capital markets, said: Consumer credit finally turned the corner in 2014, and now business lending will hopefully follow suit.

He added that the rising demand from businesses for new loans was 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.

The EY analysis suggested that the improvement should be on the up over the next few years, even set against the backdrop of rising interest rates. AlI said that by 2019, business lending could be 25 per cent above last year’s level.

In the first six months of 2015, banks injected 103.4bn into UK businesses, as opposed to 88.6bn in the first half of 2014.


 
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Rebecca is a reporter for Business Advice. Prior to this, she worked with a range of tech, advertising, media and digital clients at Propeller PR and did freelance work for The Telegraph.

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