EY predicts overall lending to rise

Banks face fight to win back lending from alternative providers

Loan applicationBanks are expected to grow their lending to businesses this year but will have to claw back market share lost to alternative finance providers, according to a report out today.

The Ernst & Young Item Club believes net lending could rise by 17% over the next three years and pump a further £66 billion into growing companies.

But some of this is likely to come from sources such as crowdfunders who have filled a vacuum left by the banks since lending was tightened in the aftermath of the financial crisis in 2008.

The forecast comes against recent figures from the Bank of England showing that lending by banks to small and medium sized enterprises fell by £1 billion in December.

A new report from the Peer-to-Peer Association revealed that alternative finance had doubled in the last year over a year earlier.

Chris Price, EY Item’s UK head of financial services, said: “While there is little doubt that traditional bank lending will find its feet again, it looks like the recent lending drought has permanently changed borrowing behaviour.

“The challenge for banks now will be regaining market share from the alternative finance providers who have successfully plugged the gap for the last six years.”



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