Bank Lending Set to Fall as Loan Write-Offs Rise

More ominous signs in the news today signaling that securing a bank loan, either as an individual or as a business, is set to become even tougher!

This is due to this year having the highest level of write-offs on corporate loans since the 1990s. A survey by the Ernst & Young Item Club predicts that the amount leant by UK banks will contract by 6.8% in 2012 to £419bn – a long way off the £575bn peak in 2008. This huge difference is due to an overwhelming 1.9% of business loans being written-off; a proportion not seen since the recession of the mid 1990s.

Furthermore, research showed that insolvencies were likely to rise most sharply in the North-East and Wales, while a decrease in lending to manufacturers will no doubt compound the issues and hence worsen the outlook for the region.

The inevitable decrease in mortgage lending will also be felt worst in the North. The survey revealed that “any growth will be spread very unequally across the country” and that “The north-south divide that we are forecasting in economic conditions is also likely to be reflected in housing market activity.”

So what significance will this have on the UK Business Funding environment? Clearly banks are no longer the ‘way forward.’ There are numerous other ways for a business to raise finance (without the use of a bank) – maybe we will see a shift towards these less conventional methods of funding.

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