Bank of England figures showed on Friday that net business lending dropped nearly £3bn after a £545m contraction in March, and was 4pc down on the year, dealing a blow to hopes that investment might spur growth.
Mortgage approvals rose by less than expected to 53,710 in April, their highest level since January but below the 54,500 forecast by economists in a Reuters poll.
The Bank of England has been trying to bolster credit growth to support Britain's recovery via its Funding for Lending Scheme, which offers banks cheap credit if they maintain or increase lending to households and businesses.
It has succeeded in lowering banks' finance costs and reducing the cost of mortgages since its launch in August, but its impact on business lending has been less visible to date, and last month the BoE tweaked its terms and conditions to increase incentives to lend to small firms.
Friday's figures showed the need for this, with lending to smaller businesses shrinking by £660m after a £115m fall the month before, again the biggest drop since December.Net mortgage lending, which lags approvals, rose by a strong £875m, well above expectations and its highest since December.
Mortgage lender Nationwide said on Thursday that house prices were rising at their fastest annual rate in 18 months, in part due to a boost from the Funding for Lending Scheme launched by the BoE in August. Unsecured lending consumers rose by £524m, above expectations.
Brian Hilliard, of Societe Generale, said: "It's a disappointing set of numbers both on mortgage approvals and on lending to SMEs. The problem getting credit to SMEs seems to be pretty intractable, and it be may be more of a demand-side issue than a supply-side one.
Overall, I can't imagine the Monetary Policy Committee will be happy with these numbers."
But Philip Rush of Nomura said: "These money and lending figures are choppy so I'm reluctant to read too much into them.
There has been an improvement in the Bank of England's favoured of M4 but it is a choppy series and there's no decisive move to get excited about."
Earlier on Friday, market research company GfK reported that consumer sentiment rose to a six-month high in May, though it still remains in the doldrums by historic standards.
telegraph.co.uk
Mortgage approvals rose by less than expected to 53,710 in April, their highest level since January but below the 54,500 forecast by economists in a Reuters poll.
The Bank of England has been trying to bolster credit growth to support Britain's recovery via its Funding for Lending Scheme, which offers banks cheap credit if they maintain or increase lending to households and businesses.
It has succeeded in lowering banks' finance costs and reducing the cost of mortgages since its launch in August, but its impact on business lending has been less visible to date, and last month the BoE tweaked its terms and conditions to increase incentives to lend to small firms.
Friday's figures showed the need for this, with lending to smaller businesses shrinking by £660m after a £115m fall the month before, again the biggest drop since December.Net mortgage lending, which lags approvals, rose by a strong £875m, well above expectations and its highest since December.
Mortgage lender Nationwide said on Thursday that house prices were rising at their fastest annual rate in 18 months, in part due to a boost from the Funding for Lending Scheme launched by the BoE in August. Unsecured lending consumers rose by £524m, above expectations.
Brian Hilliard, of Societe Generale, said: "It's a disappointing set of numbers both on mortgage approvals and on lending to SMEs. The problem getting credit to SMEs seems to be pretty intractable, and it be may be more of a demand-side issue than a supply-side one.
Overall, I can't imagine the Monetary Policy Committee will be happy with these numbers."
But Philip Rush of Nomura said: "These money and lending figures are choppy so I'm reluctant to read too much into them.
There has been an improvement in the Bank of England's favoured of M4 but it is a choppy series and there's no decisive move to get excited about."
Earlier on Friday, market research company GfK reported that consumer sentiment rose to a six-month high in May, though it still remains in the doldrums by historic standards.
telegraph.co.uk
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