Opportunity for P2P as banks tighten business lending
HIGH street banks lent £312m less to UK businesses in September, indicating new opportunities for the alternative lending sector.
Business lending by conventional banks saw its biggest slump since June, according to figures released on Wednesday by the British Bankers’ Association (BBA), the trade body for the banking industry.
The BBA also said its members approved 38,252 mortgages in September, which is a 15 per cent decline year-on-year, but a slight increase from August’s 21-month low of 37,241.
However, consumer lending is growing at its fastest rate in almost a decade, with a net £175m increase in September, driven largely by demand for credit cards.
With conventional banks tightening their lending to businesses, the P2P sector has urged the government to do more to promote alternative finance options.
“The fall in business lending among Britain’s biggest banks, indicated by today’s figures, suggests that post-Brexit nerves and economic volatility have chipped away at the confidence of both high-street lenders and business owners, who may well have shelved expansion plans since the EU vote,” said Kevin Caley, founder and chairman of P2P platform ThinCats.
“This uncertainty is being made worse by the recent drop in the value of sterling and the inflationary pressure resulting from this.
“With less than a month until the Autumn Statement, it would be hugely encouraging to see the new chancellor place business lending high up on his agenda by encouraging competition from the alternative finance sector.”
The BBA attributed the decline in business loans to a combination of Brexit uncertainty and the interim period before rate cuts reduce the cost of business borrowing.
“Business borrowing decreased slightly again in September, which may be in part down to uncertainty following the EU referendum,” said Dr Rebecca Harding, BBA chief economist.
“There is a longer time lag behind corporate investment decisions so it may take longer for the effect of the interest rate cut to filter through to such borrowing.”