Bank Loan Numbers Expected To Fall
It has become much harder to obtain a bank loan in the UK in recent years, due to the effects of the credit crunch and banking crisis, yet despite this, the number of new bank loans being offered has been increasing over the past few years.
However, a new report from the Ernst & Young ITEM club has predicted that the amount of new lending through traditional bank loans is likely to shrink this year, for the first time since 2009, as a growing number of borrowers are obtaining loans and finance from alternative sources.
The prediction is that overall loan amounts from banks will shrink by around 2.2 per cent over the course of the next twelve months, although bank loan lending increased by around 4.3 per cent during last year.
Last year, the top banks in the UK made an agreement with the government to increase the amount of new lending on both personal loans and business loans to small and medium sized firms, under an arrangement known as “Project Merlin”. However, many small businesses have complained about their inability to get the loan they require from their bank.
As a result of banks inability, or unwillingness to offer loans to anyone, both individuals looking for a personal loan and small firms looking for a business loan are turning to alternative methods of funding, such as short term loans and pay day loans, which do not place the same restrictions on loans as the banks seem to do.
Neil Blake of Ernst & Young said “We have been warning about the impact of bank deleveraging could have on the economy for some time, but this is the first time the will be an annual contraction in total loans since 2009, when the UK economy was still suffering from the immediate effects of the global financial crisis.”
