Bank lending to the British private sector is still 20 per cent lower than immediately before the financial crisis, according to new research published today.
UK businesses borrowed $2.29 trillion (£1.69 trillion) from banks in 2016, the analysis by accountants UHY shows. That means lending is still far short of the $2.87 trillion recorded in 2008.
The UK is one of the European laggards in G7 group of developed economies, which saw bank lending contract by one per cent over the same period, despite a 14 per cent rise in bank lending in the US.
In contrast, the world’s biggest emerging markets have seen bank lending soar, with corporates in so-called Bric nations, comprising Brazil, Russia, India and China, expanding borrowing by 209 per cent since 2008, UHY said.
The vast bulk of that lending was driven by China, which has seen a massive expansion in corporate borrowing fuel a booming economy. However, it has also raised fears that lending may be running unsustainably high, paving the way for a painful crash.
Laurence Sacker, managing partner at UHY Hacker Young, said: “It’s debateable whether the appetite to lend to Brics and other emerging economies is sustainable, as debt levels increase while economic growth slows in countries like China. Scrutiny of companies’ ability to service their borrowing will be increasingly intense.”
In the UK part of the weak rebound in bank lending is down to more stringent regulation since the financial crisis, as well as lower confidence in the banking sector, said Sacker.
However, larger companies have been able to borrow more heavily on capital markets, in the midst of a historic bull market for bonds.
Data from the Bank for International Settlements shows that credit to the non-financial sector in the UK rose from 224 per cent of GDP in the first quarter of 2008 to 280 per cent of GDP at the start of 2017.