BoE Reports UK Business Lending Picking Up

Further evidence of improving UK economic growth has come from the Bank of England (BoE), which said that lenders expect demand for secured loans to increase significantly in the second quarter.

The BoE’s quarterly
‘Credit Conditions Survey’
reported that lenders have already reported a strong rise in demand for loans from UK large and midsize firms during Q114 and it is expected to rise further in Q2. Demand for loans from small firms also rose.

Offering evidence that a long-awaited upturn in UK business investment is finally underway, lenders reported that businesses sought loans to fund merger and acquisition (M&A) activity, build up stock and finance capital investment.

The BOE said competition between banks to make new loans has led to a fall in the cost of corporate credit, particularly for big companies, and a relaxation in loan terms. Banks reported that they made more credit available to businesses between January and March and expect to increase supply further in Q2, according to the survey.

UK business investment rose at 8.7% on the year in the fourth quarter of 2013 after a long decline. The British economy expanded at an annualised rate of 3% in H213, its best six-month performance since 2007. The first estimate of growth for Q114 will be published 29 April.

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