Slump in business borrowing is due to lack of demand says Bank

Ben Southwood
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LENDING to businesses slumped in May, despite decent credit conditions, according to Bank of England data released yesterday.

Net lending was down £1.7bn in May, a fall that put net credit 3.1 per cent lower than the same month last year, and £10.6bn lower than at the end of 2008.

Borrowing by small and medium enterprises has been decreasing for every month since August last year, and even then the increase was minuscule.

The Bank puts this mainly down to demand, arguing that credit conditions have hardly changed, but some business lobby groups disagree.

“The big banks are…hoarding money rather than lending it out to the small businesses that need it to invest and help the UK grow its way out of recession,” claimed John Walker, national chairman of the Federation of Small Businesses (FSB).

He points to FSB surveys that found some three fifths of small businesses wanting to expand, and a significant minority succeeding in appeals having previously been told their applications were too risky.