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Peer2Peer Finance News | January 18, 2019

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BoE notes weak demand for business finance

BoE notes weak demand for business finance
Tim Evershed

DEMAND for corporate credit remains subdued, according to the Bank of England’s latest report into business conditions.

The central bank attributed the weak demand to both strong cash balances and heightened uncertainty.

It noted that there had been demand for finance to support M&A activity, and some firms had undertaken pre-emptive refinancing ahead of Brexit.

The Bank also said that the supply of credit had tightened slightly for small firms.

Overall, investment intentions remained modest, reflecting continued uncertainty around Brexit, according to the report.

“From a refinancing perspective, many British firms have entered battle stations in advance of Brexit,” said Mark Dyason, managing director of the specialist finance broker, Thistle Finance.

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“Recent months have seen a surge of companies – especially those in the retail sector – seeking to refinance their debts in order to improve cash flow and reduce costs.

“With Brexit fast approaching, companies aren’t retreating into their shells but many are taking pre-emptive measures to hedge against potential turbulence and reduced demand.”

The Bank’s report noted that the adverse weather in February and March contributed to a marked slowdown in retail sales values and consumer services growth.

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Store-based retailers had reported significant sales declines while restaurants, cinemas and hotels were also badly affected.

“Companies are proactively addressing Brexit rather than risking falling behind the curve,” said Dyason.

“The retail sector in particular is on the ropes and many retailers are seeking refinancing options to increase liquidity and reduce their overheads. The clock is ticking and they need to get their houses in order.”

Read more: BoE issues warning to SMEs using property as loan collateral