NET lending was negative in August, statistics showed yesterday, with more businesses paying off debt than taking more out.
The net monthly flow of lending to businesses was minus £2.2bn in the month, according to Bank of England data.
The total stock of lending shrunk 2.2 per cent at an annualised rate in the three months to August, and the last 12 months have seen net lending 3.1 per cent lower than the 12 months before.
This fall came despite the government’s flagship Funding for Lending scheme (FLS) – designed to boost lending – which began at the start of August.
John Walker, chairman of the Federation of Small Businesses, said that it was too soon for FLS to have had an impact, but wondered why the National Loan Guarantee Scheme – launched in March with a similar goal – had failed to boost lending.
Consumer credit also sagged in August, though at a slower rate – the net monthly flow was minus £0.1bn, bringing the annualised three month growth rate down to minus 0.6 per cent.
This came as other data showed a collapse in mortgage lending. Gross mortgage lending dived £1.3bn in September, the Council of Mortgage Lenders (CML) said, a fall of 10 per cent, putting last month’s lending a full 15 per cent lower than the same month a year earlier. In total, £11.6bn was loaned to homebuyers and people remortgaging over the month. But CML top economist Bob Pannell said the drop might be due to a one-off Olympic effect, and not necessarily underlying weakness.