Business lending to non-financial businesses plummeted in June 2015 by the largest amount since records began more than four years ago, the latest data released by Bank of England showed on Wednesday.
The BoE figures also showed that mortgage approval rose last month to 66,582, compared with 66,000 expected in a Reuters poll of economists, and lending to consumers continued to rise strongly. And the value of mortgage lending rose by the largest amount in almost seven years.
While a volatile data series, business lending to non-financial businesses fell by 5.487 billion pounds in June, the biggest decline since records started in May 2011 and compared with an 818 million pound increase in May.
The BoE said it did not have anecdotal evidence for the decline for business lending, which policymakers consider key to driving a sustainable economic recovery.
Finance minister George Osborne said earlier this month that he was giving a new remit to the Bank of England’s Financial Policy Committee that stressed the importance of banks lending for productive investment.
Business Lending to SMEs
However, business lending to small and medium-sized businesses rose by 353 million pounds.
The figures suggested Britain’s housing market upturn is back on track after the number of approvals fell throughout most of 2014, cooling house price growth and easing concerns about a bubble in the housing market.
Tighter rules on mortgage lending took effect last year, requiring banks and building societies to make more rigorous checks on whether borrowers can afford their loans.
But there have been signs that the housing market is heating up again. Mortgage approvals have risen in most months this year and the pace of price rises has started picking up.
Net mortgage lending, which lags approvals, rose 2.615 billion pounds in June, the biggest increase since July 2008 and comfortably beating a Reuters poll consensus of 2.05 billion pounds.
The BoE said consumer credit grew by 1.22 billion pounds in June. Economists had expected an increase of 1.1 billion pounds. Consumer credit grew 7.6 per cent year-on-year in June, the biggest rise since April 2006.
Despite only weak rises in wages for much of the past five years, Britain’s economic recovery is still heavily reliant on spending by households.