Bank lending to firms plunges again despite government aid

Tim Wallace
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GOVERNMENT schemes to boost lending to companies have failed to turn around the firms’ deleveraging since the crisis, according to industry figures out yesterday.

Net lending to non-financial firms plunged by £3.5bn in December, even faster than the £3.1bn fall in November and the biggest dip since June, the British Bankers’ Association (BBA) revealed.

The decline is almost double the £1.54bn average decline over the last six months and takes the stock of outstanding bank debt to £288.1bn.

That drop comes despite the efforts of the Treasury and the bank of England’s Funding for Lending Scheme (FLS) which gives cheap funding to banks on the basis that they lend it to households and firms.

The programme has been running since August, though the Bank of England maintains it will take some time for the funding to pass through the system into actual credit provided to customers.

Mortgage lending expanded, but only very slowly.

Loans for home purchase grew by £0.6bn in December, well above the £0.1bn average expansion seen in the past six months. But that still leaves mortgage loans outstanding at £777.4bn, well below pre-crisis levels.

Consumer credit also edged up £0.3bn in the month, but that is likely to be associated with Christmas borrowing rather than long-term growth.