Bank Lending to SMEs Contracts in 2017

 

The latest statistics from the Bank of England reveal that lending to Britain’s 5.5 million private sector businesses by the largest UK banks fell by £536 million from December to January.

 

According to AltFi, this is by far the biggest retrenchment in SME lending in the past two years, and which is as far back as the data set stretches.

 

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This news will undoubtedly bring further criticism to the Banks as any reduction in lending to SMEs stifles economic growth. The reason for the fall is currently unclear, and it is unknown if the Banks will publish the reasons for the lending drop and reappraise their own lending targets.

 

AltFi Editor, Ryan Weeks says “At a glance, this does not look to be the result of seasonality. January of last year saw net loans to SMEs by the banks in question come in at a positive £236 million.”  

 

He believes Brexit may well lie at the root of the problem. Weeks says “It’s no secret that the banks have been pulling back from certain segments of the small business lending space since the UK’s vote to leave the European Union, but the January drop-off is by far the sharpest we’ve seen.”

 

Conrad Ford, CEO of loan referral platform Funding Options, says demand for credit among SMEs is unchanged.

 

“We did see a slow start to the year after the Christmas break,” he said. “It was approaching midway into January before volumes picked up, where usually this would happen in the first full working week. But since then we’ve seen pretty consistent momentum which I think suggests the demand is still out there.” 

 

As Bank lending contracts, alternative finance players are hoping the Bank’s renewed risk aversion will give SMEs more incentive to look beyond traditional channels to secure funding. 

 

The peer-to-peer lending sector as a whole lent £208 million during that same period, according to AltFi Data

 

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