UK BUSINESSES raised £3.3bn in finance in June, primarily from high street banks, but lenders have warned of an imminent credit crunch due to Brexit uncertainty.
New Bank of England data showed that UK businesses borrowed £2.5bn from banks and £800m from other sources such as bonds and equity last month, a substantial increase from a total of £1.8bn raised in May.
“During the first half of 2019, borrowing has been stronger than the same period in 2018, and the annual growth rate has, therefore, risen,” the report said. “For non-financial businesses, the growth rate rose to 4.4 per cent. Within this, the growth rate of borrowing by large business rose to 6.4 per cent; and the growth of small- and medium-sized enterprise (SME) borrowing rose to 0.8 per cent, its highest since August 2017.”
However, some lenders have warned that the credit market is likely to contract in the coming months as the chances of a no-deal Brexit increase.
“SME borrowing from the banks reached a near two-year high in June, but it was a hollow victory at best,” said Michael Biemann, chief executive of digital property lender, Selina Finance. “For the annual growth rate to reach 0.8 per cent is hardly a confidence boost for the average UK business and explains why many SMEs have filed divorce proceedings with the high street.
“SME lending by the high street banks may have ticked up slightly in June but the overall picture remains desperate and lending rates are likely to contract further in the months ahead as we enter the Brexit endgame. No-deal could see the already weak appetite of the high street banks for the UK’s SMEs disappear overnight.
“With high street banks requiring ambitious, growing businesses to jump through countless hoops to secure finance, the number of SMEs turning to alternative sources is surging.”
The amount borrowed by consumers rose from £900m in May to £1bn in June, with net borrowing for other loans and advances reaching a three-month high of £800m. Credit card lending increased by £300m compared to May.
However, there were a few signs that the credit crisis could be on the wane, as the annual growth rate of consumer credit continued to slow in June, falling to 5.5 per cent.
“As consumer credit continues to rise, there are still customers out there who struggle with debt,” warned Steve Seal, director of sales and marketing at Bluestone Mortgages. “What’s important to remember, though, is that debt can be managed and reduced – and professional, financial advisers are there to help credit customers manage their finances.”
Net mortgage borrowing by households remained largely static in June at £3.7bn, placing it in line with the previous three years’ growth. Meanwhile, mortgage approvals for house purchase increased by around 800 in June to 66,400, while the number of approvals for remortgaging also ticked up.
Broad money – a measure of the total amount of money held by households, businesses and corporations – rose by £2bn in June, which represented a decrease compared with the previous few months.
However, the total amount of money held by households rose by £5.1bn over the course of the month, largely due to an increase in interest-bearing sight deposits and ISAs.