New data points to growth
Bank lending to businesses ‘on the rise’ as economy picks up
New figures from the British Bankers Association reveal that net borrowing by businesses has grown in three of the last four months, with increased lending across a number of sectors.
There are also signs that consumer spending is on the rise which will help drive further growth in the economy.
Richard Woolhouse, chief economist at the BBA, said: “British businesses and consumers have started to put their foot on the gas. There appears to be broad confidence about the economy, which the banks are supporting through affordable credit, leading to rises in borrowing across the board.
“Business lending has risen in three of the first four months this year indicating that we might have reached a turning point. There was a significant pre-election jump in mortgage approvals which we would expect to continue in the coming months.
“There was a sharp rise in the amount savers deposited in their bank accounts and also in the amount people are borrowing through personal loans and credit cards. This suggests that consumer spending will continue to drive the British economy forwards.”
Key points in the latest data:
- Net borrowing by businesses has been positive in three of the last four months, with increased lending across several industry sectors.
- There was a significant rise in the number of mortgage approvals in April. House purchase approvals were higher than last month and 3% higher than in April 2014.
- Deposits with high street banks strengthened in April as the annual opportunity to invest in NISAs opened and attracted more funds than the same month a year ago.
- Unsecured borrowing is growing at its highest annual rate, of 4.9%, since autumn 2010, reflecting strong consumer confidence.
New figures from the Bank of England also show lending by those banks taking part in its Funding for Lending Scheme increased by £635 million in the first quarter of this year.
The FLS was launched in mid-2012 to provide cheap money to banks on condition that they lend to British businesses and households. Last year its focus was switched to small firms.
The first quarter increase reversed an 800 million pound drop in lending by FLS participants in the previous quarter.
Most of the increase in the first quarter was by Lloyds Banking Group which loaned an additional £409 million.
Tim Hinton, managing director, mid-markets and SME banking, at Lloyds, said: “This is more than any other bank participating in the Funding for Lending Scheme (FLS). Since the Bank of England started reporting SME lending in April 2013, we’ve grown our SME lending by £2.8 billion in support of British businesses.
“We have seen how successful FLS has been in helping small businesses grow with competitively priced funding, helping us to increase our SME net lending by over 20% since the start of 2011 while the market reduced by 15%. We remain committed to participating in FLS, enabling more small and medium-sized businesses to grow and help Britain prosper.”