UK bank lending has surged by eight per cent to keep businesses afloat since the pandemic began, surpassing EU lending, according to a new study by UHY released this morning.
Banks have offered around £29.3bn in businesses loans over the past year, as lending in the EU increased by an average of 5.3 per cent.
The data comes as the Bank of England called on lenders on Friday to provide companies with enough credit to see the end of restrictions as the government looks to phase out support schemes.
“It is in banks’ collective interest to continue to support viable, productive businesses, rather than seek to defend capital ratios by cutting lending, which would have an adverse effect on the economy and therefore could have an even greater negative effect on banks’ capital ratios,” the BoE said.
UHY’s study of 24 major economies found that banks in the UK boosted lending at a much higher rate than Germany, which saw a seven per cent rise, and Spain which saw a lending boost of only three per cent.
The growth in bank lending has been accelerated by the government’s Covid loan schemes, which have supplied over £70bn to businesses since March.
“We may have underperformed in some areas in our response to Covid but in terms of getting finance to businesses, this is an area where the UK has been a leader,” managing director of UHY Hacker Young Corporate Finance, Robert Kidson, said.
“The economic impact of the pandemic and the disruption to businesses cash flows has lasted longer than anyone expected…there is little certainty on when businesses can return to ‘normal’ operating levels, the UK needs to provide as much support as possible to ensure businesses stay afloat until then.”
The Treasury has extended the Coronavirus Business Interruption Loans Scheme and the Bounce Back Loan Scheme to 31 March.
The chancellor, Rishi Sunak, also confirmed a longer-term recovery loan plan for small and medium businesses worth £65bn, which will be launched in April.