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UK firms pay back debts

BRITISH companies are paying down bank loans at a record rate, using the proceeds from a surge in capital markets fund-raising, Bank of England data revealed yesterday.<br /><br />In the second quarter, British private non-financial companies paid off a net &pound;15bn, including &pound;3.6bn in June alone. They raised &pound;21bn from the debt and equity markets.<br /><br />So far this year firms have paid off more bank loans than they have taken out, the first time this has occurred since records began in 1997.<br /><br />But Jamie Dannhauser of Lombard Street Research said: &ldquo;The cash being generated by these issues is not being used for expansionary purposes but instead to restructure balance sheets.&rdquo;<br /><br />Peter Dixon of Commerzbank said: &ldquo;The fact firms are paying off debt is an indication that they are less able to find finance to roll the debt over.&rdquo;<br /><br />The Bank&rsquo;s preferred measure of broad money (M4) fell 0.6 per cent in June. Firms&rsquo; holdings of M4 rose &pound;1.2bn in June, after falling &pound;1.5bn in May.<br /><br />Households&rsquo; holdings of M4 rose &pound;3.5bn in June. With quantitative easing less effective than hoped, the Bank could look to extend it next week.