Bank lending to increase as UK dodges recession
Lending is to rise by £29bn in 2023 according to EY reports.
Lending is set to increase this year after the UK economy managed to swerve a recession, according to new projections.
Total bank loans in the UK are expected to rise 1.2 per cent in 2023 — showing a net increase of £29bn — upgraded from a predicted 0.1 per cent fall forecast in February, according to the EY ITEM Club UK Bank Lending Forecast.
A combination of a drop in inflation, lower energy bills than expected and a resilient job market also means the UK GDP is expected to increase by 0.2 per cent in 2023, rather than decrease, which could drive a rise in both consumer and business borrowing.
UK financial services managing partner at EY Anna Anthony said the UK is “still on the path to economic recovery” but that we are “in a more optimistic place than we were a few months ago”.
“The recession that many thought was inevitable is now likely to be avoided and energy prices have fallen, boosting consumer and business sentiment,” she said.
“Despite recent volatility in the global banking sector, the EY ITEM Club has been able to upgrade its growth forecasts for UK bank lending this year, which is positive news.”
Net mortgage lending is similarly expected to grow by 1.2 per cent this year, up from 0.4 per cent in the February forecast.
With both mortgage lending and total loans expected to grow this year, industry experts suggested that the wider industry consider how to use the extra external finance, whether that’s to improve and modernise areas like agriculture and farming or to upskill their workers.
“With the UK’s improved economic set to see bank lending surging, companies have a new opportunity to invest, grow and develop more sustainable business models,” HeavyFinance founder Laimonas Noreika said.
“As the global race to increase low-carbon green investment continues, UK firms need to think again about the steps they can take to reduce C02 emissions.”