BANK lending will contract through 2012 for the first time since 2009, with small and medium-sized enterprises (SMEs) particularly badly hit, the Ernst and Young Item Club predicted today.
Total bank loans will contract by 2.2 per cent in 2012, the report forecast, followed by growth of just 0.9 per cent in 2013.
The fall compares with estimated 4.3 per cent growth in 2011.
SMEs face a 5.7 per cent fall in lending this year, with construction and real estate among the worst hit.
Furthermore the cost of credit is expected to keep rising.
“The average interest rate on smaller loans, of £1m or less, is already double that charged on loans of £20m or more, and we expect this trend to continue,” warned Item Club’s Neil Blake.
“As these young companies tend to be high-growth businesses, this will have adverse knock-on effects for economic growth.”
The credit crunch will also extend to consumers who are set to see bank lending fall by a further 5.4 per cent, and will not see loans return to 2011 levels until 2014, the Item Club believes.
However, the non-bank sector is expanding quickly – bank and building society unsecured lending to individuals fell by 23 per cent, or £34bn, since 2008, while lending by high-costs consumer credit providers has risen 42 per cent, or £29bn, over the period.
