Bank loans rise by £29bn as UK avoids recession

Bank loans rise by £29bn as UK avoids recession

Banks are expected to increase their lending this year as the UK economy deviates from forecasts and housing markets show little sign of any revival, according to a panel of leading economists.

Total UK lending is expected to rise 1.2 per cent this year, a net increase of £29 billion, upgraded from a 0.1 per cent fall forecast in February, according to the EY ITEM Club UK Bank Lending Forecast. Falling inflation, lower-than-expected energy bills and a robust labor market mean UK GDP is expected to grow by 0.2 per cent in 2023 rather than contract, leading to a rise in consumer and business borrowing.

In response to the forecast, Laimonas Noreika, founder of HeavyFinance, said: “With the UK’s improving economy set to see bank lending increase, companies have a new opportunity to invest, grow and develop more sustainable business models. As the global race to increase low-carbon green investment continues, UK firms need to rethink on the steps they can take to reduce C02 emissions.

“The wider industry needs to consider how to use external funding to further improve key areas such as agriculture and farming, modernize processes as well as save time and money,” he added.

Industry expert Sjuul van der Leeuw, CEO of Deployteq said: “With banks increasing access to finance, UK businesses will have the ability to access the finance they need to invest and upskill their workforce. As confidence in the economy recovers, the key to SMEs achieving rapid growth be looking again at key tools such as automation and effective marketing platforms to empower employees and win new customers.

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“Ambitious companies cannot afford to operate a ‘business as usual’ approach when it comes to important development areas such as marketing and new business. Turbocharging growth requires the latest technology platforms, which enable companies to reach new customers and increase market share.”

Net mortgage lending is now expected to grow 1.2 percent in 2023, up from 0.4 percent in the February forecast, according to the EY forecast.

Anna Anthony, UK financial services managing partner at EY, said the UK was “still on the road to economic recovery” but we were “in a more optimistic place than we were a few months ago”.

“The recession that many thought was inevitable is now likely to be avoided and energy prices have fallen, boosting consumer and business sentiment,” she said. “Despite recent volatility in the global banking sector, the EY ITEM Club has been able to upgrade its growth forecasts for UK bank lending this year, which is positive news.”

The crisis rippling through the US banking sector has also so far had “limited impact on Britain’s highly capitalized lenders”, EY economists added, although they said downside risks were “present within the forecast”.

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