-Brian Hilliard, of Societe Generale
Lending to the U.K. businesses fell sharply last month, dropping by the biggest margin so far this year, even despite a surge in mortgage approvals. On Friday, the Bank of England said that that net business lending tumbled almost £3 billion after a £545 million contraction in the preceding month, and was 4% down on a yearly basis, diminishing hopes that investment might spur growth. At the same time, the number of mortgage approvals rose less than expected to 53,710 in April, reaching their highest level since January, however the data came below the 54,500 forecast by economists.
Since July 2012 the Bank of England was trying to boost credit growth to support the nation's recovery via its Funding for Lending Scheme, which was designed to incentivise private banks and building societies to boost their lending to the U.K. real economy. The BoE has succeeded in decreasing bank's finance costs and reducing the cost of mortgages, however its impact on business lending has been less visible to date.
In a separate report the British Chambers of Commerce said that Britain's economy will expand through 2015 faster than previously forecast. Economic output is expected to rise 0.9% this year, 1.9% in the next one and 2.4% in 2015, compared with previous forecasts of 0.6%, 1.7% and 2.2%, respectively.
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