UK banks anticipate a sharp increase in demand for loans from small businesses in the coming quarter but do not expect to make more credit available to these firms, a Bank of England survey signals.
The Bank's latest credit conditions survey was published yesterday as a separate report from the Chartered Institute of Purchasing and Supply showed the steepest monthly decline in UK civil engineering activity since October 2009 in March.
CIPS's latest survey of UK construction also signalled a further decline in commercial property construction. It showed a second consecutive monthly rise in housebuilding activity. However, overall UK construction output fell for a fifth consecutive month, with the rate of decline easing only slightly.
The Bank and CIPS reports add to a growing pile of gloomy UK economic indicators.
Lack of availability of finance for small firms has been a key issue highlighted by the Federation of Small Businesses in Scotland. And the credit climate has shown no significant improvement, in spite of the £80 billion Funding for Lending Scheme launched by the UK Government and Bank of England last summer with the aim of bolstering lending to households and businesses, and stimulating economic activity.
The Bank of England survey showed that the overall availability of credit to the corporate sector was reported by lenders to have increased in the first quarter. However, that increase was confined to large companies, with small and medium-sized firms reported to have experienced little change in credit availability.
The survey showed that demand for credit was expected to increase across all firm sizes in the second quarter, with significant increases expected for small and large companies.
However, lenders expected overall credit availability to the corporate sector to be little changed in the second quarter, although availability for large companies was expected to increase further.
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