Business loans plunge as firms delay investing

Ben Southwood
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LENDING to businesses was squeezed once more in July, according to a report released yesterday by the British Bankers’ Association (BBA).

Lending to non-financial companies decreased by over £500m in July, the BBA said, driven by big declines in loans to the retail, catering and hospitality and real estate sectors.

This decline caps off a total contraction of £9.6bn in borrowing by non-financial firms over the past six months, something that the BBA puts down to a lack of demand.

“Companies are reluctant to borrow or invest new funds while domestic and international trading activities remain subdued or uncertain,” said David Dooks at the BBA.

Analysts agreed that firms were holding out for a better economic climate, but suggested this approach might cost them in the long term.

“Businesses have proved resilient in this tough economic climate, but they cannot afford to stand still – if their future growth is to be secured, firms need to grasp investment opportunities now,” said Stephen Pegge at Lloyds.

But small businesses blamed banks for restricting borrowing, said a YouGov report, exclusively published by City A.M.

Some 35 per cent of small and medium enterprises said negotiating loans had got harder over the past three years, while just four per cent said it was easier.