Seven-year decline in lending to businesses set to end this year, says EY Item Club

Chris Papadopoullos
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Banks lent £103.4bn to UK businesses in the first half of 2015 (Source: Getty)
Business lending will grow for the first time since 2008, a group of economic forecasters said today.

Banks lent £103.4bn to UK businesses in the first half of 2015 compared with £88.6bn in the first half of 2014. This trend is expected to continue throughout the rest of the year, according to the EY Item Club, a group of economists.

It would put an end to years of contraction in business lending, which peaked at £575bn in 2008.

The Item Club believes business investment will grow by an average annual rate of 6.5 per cent over the next three years, fuelling demand for borrowing.

“At this rate, the rise in overall business lending this year will only be marginal,” said Omar Ali, UK head of banking and capital markets at EY.

“Add further fines on the horizon, the introduction of a banking tax surcharge, ongoing regulatory reform, and the pressure to create more competition to the mix, and you can see why banks won’t be pausing to celebrate yet.”

The Item club also warned that lending to smaller firms could be constricted by regulations set to be introduced in 2019.

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