Credit conditions for the UK’s businesses are improving, but remain “tight” for small businesses, according to the Bank of England.
Its July report on trends in lending also notes its network of agents are reporting non-bank alternatives, such as peer to peer lending and crowdfunding are an “increasing source of finance” for some firms, reports the FT’s Emily Cadman.
The BoE expects demand for credit from businesses to continue rising, but notes that “many firms” continue to seek to reduce debt levels and fund expenditure out of cash despite a fall in the cost of bank finance.
It added that the proportion of SMEs not seeking finance has “increased steadily over time” reaching 82 per cent in the first quarter.
The quarterly report comes as the UK competition authorities confirmed their intention to conduct a wide-ranging probe into the UK banking sector amid growing frustration among politicians, consumers and small businesses at the lack of competition between them.
The probe will cover lending to small businesses but also focus on personal and business current accounts.
Data released by the BoE in June showed a strong increase in net lending to businesses after a near seven year decline.
Lending to non-financial businesses increased £3.4bn in May, compared with an average monthly fall of £2.1bn over the previous six months. However, the credit thaw failed to reach small and medium sized companies, which suffered another £200m fall in loans.
