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Business lending 'to hit five-year low'

Date Added: 29/07/2013  

A new report has stated that business lending in the UK is set to fall to a five-year low this year, before recovering during the course of 2014.

According to the latest quarterly forecast by the EY ITEM Club, 2013's business lending figures will be lower than any point over the last four years.

It was predicted by the body that business lending for 2013 will stand at £422 billion, which would be around 25 per cent lower than in 2008.

But the group, which is sponsored by EY, formerly Ernst & Young, said the UK was "finally on a path to sustained growth" and suggested business lending could be set to turn a corner from next year.

The government recently announced plans to force banks to reveal their business lending data for regions around the country in an attempt to improve competition and encourage lenders to provide more loans to those small to medium-sized enterprises in need of extra financing.

Chief secretary to the Treasury Danny Alexander announced lending data from the Royal Bank of Scotland, Lloyds Banking Group, HSBC, Barclays, Santander UK, Nationwide and Yorkshire and Clydesdale Banks will be published under the terms of the agreement.

He added: "It is a major step forward in terms of transparency and should encourage competition by helping smaller lenders to identify gaps in the market."

Data collected by the EY ITEM Club suggests that the UK will experience a 1.1 per cent expansion in the economy this year, followed by a 2.2 per cent increase in 2014, while unemployment will continue to fall in the next two years.

It was also noted in the quarterly forecast that the Bank of England's Monetary Policy Committee will hold interest rates at their current record low level for some time to come.

While interest rates have remained at a record low for the UK of 0.5 per cent since March 2010, this situation is expected to stay the same until 2016 at the earliest.

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Posted by Julie Cutts

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