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Bank lending continues to fall

The Bank of England has just published its Trends in Lending report which seems to present nothing but bad news. It says that in the second quarter of 2009 total net lending to businesses fell across all the main industrial sectors.  Gross lending (not allowing for any repayments) fell from £42.9bn in the first quarter of 2009 to £27.3bn in the second, showing a downturn of 36%.

 

It was particularly difficult for small businesses to raise money, although the major UK lenders suggested that there was little demand coming through. By contrast, larger companies were obtaining money in the bond and equity markets rather than borrowing from banks.

 

There was also a stabilisation in net consumer credit flows at very low levels. Lenders said that they had yet to detect any significant signs of an increase in the demand for consumer credit.

 

The Bank of England also released the latest money supply figures which showed that the key measure of broad money, M4, rose by 1% in July compared to the previous month. This follows a fall of 0.3% in June and suggests that quantitative easing, which began in March, may at last be having an effect on the amount of liquidity in the economy.

 

Other positive news came from the Council of Mortgage Lenders which said that mortgage approvals had risen 26% in July. Although the bad news is that this level is still 38% down on the same month in 2008.

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Posted in Bank of England, Lending, Money Supply

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