Lending to small businesses continues to fall

Date: 20th September 2010

The UK has seen a fifth successive month of falling lending rates, with small businesses being hit particularly hard, the Bank of England (BoE), has said.

According to the latest BoE Trends in Lending report, the net monthly flow of lending contracted by £2.5 billion in July.

Lending has now fallen for five months running, although July saw the smallest fall in almost a year.

Net lending to UK businesses was down 5.7 per cent on the year, compared with a fall of 7.9 per cent in June.

"While credit conditions were easing for larger businesses, they remained tight for smaller firms. Most major UK lenders reported that demand for credit remained subdued," the BoE's report said.

It comes despite policymakers' efforts to introduce measures favourable to lending, such as keeping interest rates at a record low of 0.5 per cent.

The report covers data from the major UK lenders: Santander, Barclays, HSBC, Lloyds Banking Group, Nationwide and Royal Bank of Scotland, which together accounted for around 65 per cent of the stock of lending to businesses.

Posted by Jacob Williams