Bank lending to businesses at a low - again

After a very short, not-particularly-exciting little upsurge in June, bank lending to businesses is back down in the doldrums – and we can’t say we’re particularly surprised.

According to figures published by the Bank of England, lending to ‘private, non-financial corporations’ was down by 1.7% month-on-month during July – which means £8.4bn less was lent to businesses in July than in June, the biggest decline in lending since records began in 1997.

The statistics have caused little more than a ripple of feigned surprise among small businesses – many of whom believe last month’s Monetary Policy Committee (MPC) vote to inject a further £50bn into the economy has done little to persuade banks to lend more.

This morning’s Daily Mail made the point little is likely to happen if cash put into the economy to ease financial pressures on businesses continues to go abroad. According to the Bank of England, more than £15bn of the cash generated through quantitative easing has leaked to investors abroad.

Consumer and debt specialist Vicky Redwood of economic analysis firm Capital Economics told the paper recovery will be far slower if banks continue to be unenthusiastic about lending to businesses. “The weakness of bank lending will act as a severe constraint on the overall economic recovery,” she said.

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