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British business lending down in April

London, June 1, 2013

British business lending fell sharply last month, raising questions about the durability of an economic recovery that has helped lift consumer sentiment to a six-month high.

Britain's government and central bank are concerned that poor access to finance, particularly for smaller firms, may thwart a sustainable recovery from the country's worst slump in decades.

Net business lending dropped by £3 billion ($4.5 billion) in April to stand four per cent lower than a year earlier, despite a central bank programme to boost credit to households and businesses, Bank of England (BoE) figures showed.

Similar seasonally adjusted data showed a £1.2 billion-pound monthly drop, and lending to small businesses alone also fell.

"It's a disappointing set of numbers," said Societe Generale economist Brian Hilliard. "The problem getting credit to small and medium-sized enterprises seems to be pretty intractable, and it be may be more of a demand-side issue than a supply-side one."

The Funding for Lending Scheme (FLS) has lowered banks' finance costs and made mortgages cheaper since it opened in August. The bank's data showed mortgage lending had shot up.

But the FLS has had less impact on small business lending, and last month the BoE modified the scheme to encourage banks to favour this kind of lending over mortgages, which are simpler to administer.

Britain's economy is in a state of fragile recovery after contracting for much of 2012, and earlier yesterday the British Chambers of Commerce raised its growth forecasts for the first time since the financial crisis.-Reuters




Tags: British | business | lending |

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