British banks expect to increase lending

Published 03rd Apr 2009

The credit crunch showed fresh signs of easing today as the Bank of England reported that lenders expect to make more loans available to people and businesses over the next three months.

Contrary to expectations at the start of the year, credit available to larger companies has increased over the past three months and banks expect that trend to continue, the Bank said.

Unsecured credit to households and small firms fell in the past three months, but by less than had been expected and banks expect the position to stabilise in the next three months.

Overall, more banks expect to boost credit availability than to reduce it in the next three months, the Bank found in its closely watched survey of banker intentions.

A lack of available credit from banks desperate to hoard cash has been seen as a major cause of the recession and the reason the Government has allotted more than £1 trillion in capital injections, loans and guarantees to Britain's embattled banks.

Howard Archer, chief UK and European economist at IHS Global Insight, said today's survey suggests "various policy measures undertaken by both the central bank and the government to boost bank lending are starting to have a beneficial impact".

He added: "It raises hopes that credit conditions will increasingly become less of a constraint on economic activity over the coming months. This is critical to recovery prospects.

"Hopefully, the Bank of England's quantitative easing programme will further improve matters."

The new Credit Conditions Survey also found that margins on loans to people and businesses had widened considerably and banks expect them to continue widening, holding out the promise of high profits on future business.

However, default rates rose in the past three months and are expected to continue rising.

Source: ' Times '

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