Oh no! Lending to businesses to hit a seven-year low but peer-to-peer to soar

UK banks will lend £422bn to British firms this year, the lowest amount since 2006, although peer-to-peer lending will increase five-fold, a new report has claimed.

The study released today by Ernst & Young Item Club found that lending will not return to its pre-recession peak of £575bn till 2017. It predicts that bank lending will only improve as the economy recovers, rising to £452bn next year, £497bn in 2015, £545bn in 2016 and £602bn in 2017.

However, EY also found that peer-to-peer lending will take on a growing slice of the lending market with the £200m lent to SMEs in this fashion swelling to £1bn over the next three years. This rise is seen as welcome but will not be enough to fill the gap left by bank lending and could spell more funding trouble for Britain’s growing fleet of SMEs that are struggling to raise capital.

Carl Astorri, economic advisor to EY’s Item Club, said: “We expect peer-to-peer lending to grow rapidly in the next few years as demand for funding from SMEs outstrips supply from the banks.”

Chris Price, a partner at EY, said: “Corporate lending won’t increase enough in 2013 to compensate for the dire first half of the year. We expect it to pick up in 2014, raising hopes that UK companies may invest some of the cash back into the wider economy.

“The banks should now be able to increase their credit supply - regulation permitting.”

  • We are delighted to open entries to the LondonlovesTalent Awards, celebrating London and South East leaders and businesses truly championing talent, skills, leadership and workforce development
  • Try our free newsletter

Related images

  • money

Social Bookmarks