Banks and Business Continue to be Cautious When it Comes to Credit

The latest quarterly Credit Conditions Survey from the Bank of England for Quarter 3 2018 reveals that both bank and businesses appear to be adopting a cautious stance when to comes to lending and borrowing.

This quarterly survey of bank and building society lenders is to assist the Bank of England in understanding trends and developments in the banking sector. Lenders are asked about their experiences over the past three months and the coming three months in terms of lending to businesses of all sizes.
The Bank has reported that the overall amount of lender credit made available to businesses of all sizes was unchanged in Quarter 3. Within the total available finance, the availability of credit provided to small businesses was reported to have increased and was unchanged for medium and large businesses. So all appears well from the lender’s perspectives in the last Quarter.

However, the Bank’s monthly reporting of amount of credit taken by small businesses shows that the total amount of lending in the 12 months to August has essentially flat-lined this year. It seems that small businesses have limited appetite to borrow and not heeding the bank’s message that they have funds to lend.

Looking ahead to the next Quarter, this lack of appetite to borrow is reflected in lender’s view that the overall amount of credit they will make available in Quarter 4 is expected to decrease slightly.

Both borrowers and lenders seem to be battening down the hatches.

As well as concerns about the economy and the political situation, small businesses may also be wary of taking on additional debt due to concerns on ability to pay. The Credit Conditions Survey highlights that lenders have reported an increase in default rates, which are missed payments, on loans to businesses of all sizes in Quarter 3. Lenders though are expecting default rates to remain unchanged for businesses of all sizes in Quarter 4.

It would appear that an element of uncertainty creeping in for both lenders and businesses in terms of what lies ahead in the last Quarter of 2018.

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