Home Business NewsBusinessBanking News Bank lending to firms surges to a 13-year high

Bank lending to firms surges to a 13-year high

by LLB Editor
10th Aug 20 6:55 am

The COVID-19 pandemic is expected to see business lending grow by 14.4% this year – the highest level in 13 years – according to an EY ITEM Club Interim Bank Lending Forecast. Additional bank finance(including government-backed loans) has been crucial to UK corporates and SMEs during the pandemic, and this latest EY ITEM Club forecast predicts that firms as a whole will only start repaying this additional debt in net terms, and reduce their borrowing, from 2022.

Conversely, the lockdown has caused a significant slowdown in bank lending to households. Demand for consumer credit is predicted to fall by 15.9% in 2020 – the biggest annual fall since records began in 1993. Mortgage lending is forecast to rise, but only marginally, by just 2.6% in 2020. This would be the weakest growth since 2015, with further slow growth expected over the next two years as unemployment rises.

Omar Ali, UK Financial Services Managing Partner at EY, comments: “COVID-19 has caused unprecedented challenges for the UK economy, putting financial strain on both businesses and households, and has resulted in a staggering amount of money being lent to firms over a short period of time. With a weakened economy, banks face increasing write-offs on all types of lending and, with slow growth for consumer credit forecast, this will add pressure to their profitability and ultimately their ability to lend more to businesses to help kick start growth.”

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