Bank lending to business in the UK will go up for the first time in four years, according to The Ernst & Young ITEM Club outlook for financial services.
Lending to corporates shrank by 5% last year, hitting the lowest level since 2006, but the outlook for lending this year is gradually improving as corporate risk appetite starts to recover. Lending is expected to grow by 3% to £440bn in 2013 and by 8.5% to £477bn in 2014.
Andy Baldwin, head of financial services in Europe, the Middle East, India and Africa at Ernst & Young, said: “In recent months, much of the media and political attention has focused around banking competition on the high street and you might be forgiven for thinking we were still in the midst of the banking crisis, but behind the scenes banking fundamentals have quietly been improving and banks are now in a better position to be able to provide funds to the wider economy.
“Our analysis suggests the main drivers of banks’ return to lending will be better access to wholesale funding and a decrease in non-performing loans, rather than the Funding for Lending Scheme making a material difference. That said, the scheme is making a contribution in shifting emphasis and encouraging lending expansion across the sector, while also helping to restore confidence and stimulate demand from consumers and SMEs alike.”
Sally Percy is editor of The Treasurer