Lending to “non financial” business slumps £14.7bn

by Gill Montia

Story link: Lending to “non financial” business slumps £14.7bn

Despite Government threats, the UK’s banks continue to reduce their lending to businesses outside the financial sector.

According to Bank of England figures, lending to “non-financial corporations” plummeted by a record £14.7 billion between April and June, compared with the previous three months.

During the second quarter of 2009 the slump hit wholesale and retail firms by £6.3 billion; manufacturers by £4.5 billion; legal, accountancy and consultancy firms by £2.7 billion and the construction industry by £2.1 billion.

Earlier this week, TMA (UK), the trade body that represents UK turnaround and recovery specialists, appealed to banks to be more “even-handed” in their business lending.

The body’s president, Tyrone Courtman, was at pains to point out that current growth in individual and mortgage lending has to be supported by business lending.

He argues if firms fail to raise the operating capital they need the economy will continue to shrink because businesses pay the salaries that enable individuals to borrow.

Meanwhile, the British Bankers’ Association has recently defended its members by explaining: “Borrowing by non-financial companies continues to be weak, either because funds raised on capital markets are replacing bank borrowing or because companies are seeking to withstand the recession by reducing their debt”.