Firms’ demand for credit fell again in June

Tim Wallace
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BUSINESS borrowing slumped again in June according to industry figures released yesterday, raising more fears that there is little demand for credit and so the government’s “funding for lending” scheme, which starts next month, may not work.

Net lending to non-financial businesses fell £3.2bn in June, reversing May’s £1.3bn rise, British Banking Association data showed.

Household lending also performed poorly, with the number of mortgages approved falling from 66,653 in June 2011 to 59,923 in May 2012 and 51,610 last month.

“We do not think that the terms of the funding for lending scheme will sufficiently change the banks’ lending patterns, as they remain under continued pressure to maintain large liquidity buffers and increase their capital ratios,” warned Barclays analyst Blerina Uruci. “Furthermore, credit is demand- as well as supply-constrained, in our view, and therefore purely supply side measures are bound to have only a limited effect on credit flows.”