Business lending by British banks tumbles sharply in March

Lending to businesses by major British banks tumbled sharply in March, while net personal loans and overdrafts increased in the same month for the first time in five years, figures published by the British Bankers' Association (BBA) revealed.

According to the just published BBA report, outstanding lending to private non-financial corporations decreased by a net £2.1 billion to £277 billion in March.

It was the sharpest monthly fall since July last year, and a much steeper decline than the fall of £676 million in February. It was outshined the previous six months' average fall of £510 million.

On the other hand, net personal loans and overdraft borrowing jumped 0.5 per cent year-on-year in March. It was the first monthly increase in net personal loans and overdraft borrowing since January 2009. The report also revealed that 45,933 number of mortgage approvals, totaling £7.5 billion, were made to home buyers in the month under review. The BBA said increase in net personal loans and overdraft borrowing was a 'clear' sign of improving consumer confidence.

BBA Chief Economist Richard Woolhouse said, "Consumer confidence is clearly picking up as more people seek to borrow from their bank to fund new purchases. This is against a backdrop of continued buoyancy in the mortgage market."

Official data recently showed that retail sales volumes improved 0.1 per cent month-on-month in March this year. The improvement surprised analysts as they had predicted a fall of 0.4 per cent.