Drop in commercial lending alarms turnaround specialists
by Gill Montia
TMA (UK) is urging UK banks to be more “even-handed” in their business lending.
The trade body, which represents UK turnaround and recovery specialists, has made its plea follows the publication of Bank of England figures showing rises in both individual and mortgage lending, but a sharp drop in the amount of credit made available to businesses.
Official figures for June show that secured and unsecured lending to individuals rose by £0.7 billion, while mortgage approvals were at their highest level for 14 months.
However, business lending fell for the third successive month, to £1 billion.
The decline took commercial lending in the 12 months to the end of June down 1.2% year-on-year, compared to a positive growth rate of 0.8% for the 12 months to the end of May.
TMA (UK) president, Tyrone Courtman, comments: “The growth of individual and mortgage lending may seem like a hopeful sign to many, but unless business has the operating capital it needs then the economy will continue to shrink.”
He adds: “After all, it’s business that pays the salaries that enable individuals to borrow.”
When RuBanking spoke to Graham Allen of the Commercial Funding Alliance recently he suggested that overall, small and new businesses are not receiving the right level of funding.
According to Mr Allen, banks are too focused on lending to existing customers; businesses where there is a certainty of repayment during the recession; and firms that “mustn’t go bust”.
Meanwhile, some sectors have become persona non grata, generally because of stiffer lending criteria but in some cases because historically they have been poor performers and unprofitable.
Lenders have therefore been seizing the opportunity to exit.
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