Bank lending to businesses continues to fall

by Gill Montia

Story link: Bank lending to businesses continues to fall

In its latest Trends in Lending report the Bank of England has revealed that total net lending to businesses fell across all the main industrial sectors during the second quarter of 2009.

For smaller firms, without access to the capital markets, the availability of finance remained “more subdued”.

However, corporates turned to the markets to raise funds, with reports of some companies repaying bank debt using money raised on the capital markets.

The report concludes “overall this year there has been a marked change in corporate financing patterns relative to 2007 and 2008″.

Demand for net new lending for businesses has remained “very subdued” with lenders saying in July “they had yet to detect any significant increase in demand for loans to finance business expansion”.

The trends that have contributed to weak net bank lending to businesses are all expected to continue during the second half of the year.

Meanwhile, official data for June showed net mortgage lending close to its lowest level since the Bank began recording monthly figures in 1993, with lenders reporting that weak net lending continued into July.

Gross lending for house purchases continued its recovery since the beginning of the year, but remortgaging activity remained very subdued.