Net lending to businesses falls further

Recently released figures have suggested that net bank lending to businesses in the UK continued to fall in the month of May despite the fact that the recession is now over and the economy is meant to be getting back on its feet. Since the onset of the global credit crisis there has been a lot of concern over lack of lending by banks to businesses in the UK, and this is something that many thought would result in the recession being more prolonged than it otherwise may have been.

The recent figures were released by the Bank of England, and showed that net bank lending in the month of May from banks to businesses had fallen. However, it was also noted that the rate at which banks were writing off bad loans had fallen. The central bank also noted that the demand for borrowing by smaller and medium sized businesses remained subdued, which may have contributed to the falling figures.

According to figures net bank lending to businesses has been falling on a month by month basis since December of 2008, although there was a slight respite in November of last year, when net lending by banks to businesses saw a modest increase. There are concerns over the amount that lenders are now having to pay to borrow themselves, and it is thought that these costs could end up being passed on to corporate customers.

The data came from the recent Trends in Lending report from the central banks, and report noted: “The intensification of market concerns over fiscal sustainability in a number of countries at the start of May resulted in heightened volatility and a reduction of liquidity in funding markets.”