Lending to UK businesses fell by £5.5bn in June, according to the latest Bank of England figures, which is the biggest drop since 2011, when the bank began collecting data.
The figures may come as a surprise to some, given the previous six months have seen an average monthly increase in lending of £0.2bn.
The results highlight that the business services sector – which includes accountancy and consulting – experienced a drop of £4.4bn during June, although the SME market remained unaffected, with lending growing by £353m.
Andrew Connors, head of midmarket commercial banking at Lloyds, explained that the fall may be due to increasing numbers of businesses raising cash using invoice financing, which allows money to be borrowed against outstanding invoices.
Additionally, the Financial Times reports that “other possible explanations include businesses choosing to repay debt that would become more expensive when interest rates went up.”
Philip Brennan, head of Businesscomparison.com, commented on the report, saying:
“There are a variety of different finance options for businesses, both big and small, so it’s unsurprising that there has been an increase in the amount of companies thinking outside their banks and looking at alternative solutions.
“By moving away from traditional lending options, such as loans from the mainstream lenders, businesses – especially smaller ones – are able to find a way to secure finance that is much more beneficial and tailored to their exact needs.
“That said, the Federation of Small Businesses has only this week reported that the big four banks still account for 85 per cent of lending to SMEs. Although SME access to finance is on the rise, many do struggle to secure funding from the bigger banks, so it is important that they continue to research all the options available to ensure they get a solution that is right for them.”