Business bank lending drops to seven-year low

UK businesses will lend approximately £420bn from the major banks this year, the lowest amount since 2006, according to a new influential report. Ernst and Young’s respected Item Club study revealed that lending to UK businesses will not return to levels seen before the global slowdown (£575bn) until 2017 at the earliest, with funding from other sources likely to fill the gaps left by a shortage in available bank credit. Peer-to-peer lending and invoice finance are two alternatives that have grown in popularity over the last few years; solutions that are predicted to prove crucial to more and more SMEs whilst bank lending figures remain low. The news comes despite data and surveys in recent months indicating that the economic situation is finally starting to show sustained growth, whilst optimism levels across a number of sectors have increased. But Chris Price, partner at EY, said: “Corporate lending won’t increase enough in 2013 to compensate for the dire first half of the year”.

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