Has lending to businesses fallen every quarter for the last three years?
"Despite a series of public promises from senior ministers and bank officials, lending to business has tumbled in every single quarter of the past three years"
Daily Mail, 16 February 2012
This morning, the Daily Mail reported that lending to businesses has fallen every quarter for the last three years. Reporting the comments of Sir Mervyn King, the Mail argued that the figures showed a reluctance in the banking sector to lend to small businesses, despite the aims of Project Merlin (announced in February 2011) to encourage banks to lend more.
Analysis
Although the Daily Mail refers to small businesses in its headline, it only cites a drop in lending to all businesses. In particular, it claims that net lending — the gap between money lent and loans repaid — has fallen by £10.7 billion in the last year.
The Mail refer to data published in the Bank of England's report Trends in Lending. Whilst this report contains data for net lending per quarter in 2011, there is extended data available from the Bank of England website dating back to 1998.
These figures confirm that net lending has fallen every quarter for the last three years. Although the data is monthly and there are occasional increases between months, the total for each quarter shows a fall in net lending. They also confirm that over the last year there has been a fall of £10.7 billion in net lending.
The British Bankers Association (BBA) publish figures on lending to small businesses, defined as those businesses with an annual bank account turnover of less than £1 million. According to their figures, net lending to small businesses was rising until the last quarter of 2009, and has fallen since. However, their figures do not yet include data for the last two quarters of 2011.
Conclusion
The Daily Mail is accurate to say that net lending has fallen for all businesses in every quarter of the last three years. However, it should be made clear that this is net lending rather than gross, and that it applies to all businesses.
The BBA figures, meanwhile, show that net lending to small businesses has fallen for seven consecutive quarters, but does not give data for the last two quarters of 2011.