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2014 to see strong recovery in business lending

Posted at July 29, 2013 | Categories : News

Business lending is expected to hit a five-year low this year, at £422 billion, according to Ernst & Young’s (EY) ITEM Club.

However, the respected economic forecaster is predicting a strong recovery from 2014 with lending to UK firms up by 7% in 2014 and 10% in 2015.

What’s more, by 2017, business lending could surpass its 2008 peak at £602 billion (up 40% on today).

ITEM Club is also predicting that SMEs will need to rely on alternative finance for the foreseeable future and crowdsourcing is expected to become an established source of funding, growing from £200 million in 2012 to hit £1 billion by 2016.

Carl Astorri, senior economic adviser to EY’s ITEM Club, says: “SME lending is still very expensive for banks, especially given some of the regulatory pressures on asset quality, and some of the funding gap will continue to be filled by non-bank lending.

“We also expect peer to peer lending to grow rapidly in the next few years as demand for funding from SMEs outstrips supply from the banks.”