Business lending to hit 13-year high as further redundancies loom

Banks will lend more to British businesses this year than at any point since the financial crash, as the UK seeks to stave off waves of redundancies.

In its interim bank lending forecast, EY said it was expecting business lending to grow by 14pc this year, in what would be a 13-year high. Last year, business lending grew by 2pc.

EY said in March banks lent non-financial companies more than £30bn net of repayments, which was around 100 times the average net lending of the twelve months to February.

Omar Ali, financial services managing partner at EY, said Covid-19 had resulted in a "staggering amount of money being lent to firms over a short period of time".

"With a weakened economy, banks face increasing write-offs on all types of lending and, with slow growth for consumer credit forecast, this will add pressure to their profitability and ultimately their ability to lend more to businesses to help kick start growth.”  

The study comes as a separate report from the CIPD and the Adecco Group suggested one in three companies were expecting to cut jobs in the third quarter of 2020.

In June, around 1,800 UK businesses told the Government they were planning a total of 139,000 job cuts. The figures were obtained through a freedom of information request submitted by the BBC.

However, it is thought the next few months could be more brutal for the jobs market once the furlough scheme comes to an end. Last week, Rishi Sunak said he was not ruling out extending the scheme, but stressed that it could not run "indefinitely".

There were some glimmers of hope for job hunters, though, with the Association of Professional Staffing Companies finding that vacancies for professional permanent roles were up 18pc month on month.

The group said levels were still much lower than last year, but that it was a sign that "we're heading in the right direction".