Eco Analysis - UK lending positive again but SME finance still weak (B. Hilliard)

Eco Analysis - UK lending positive again but SME finance still weak (B. Hilliard)

The UK money and credit release showed mortgage approvals picking up much as expected - a slightly faster pace from 63.4k to 66.7k. This is still very low compared to all the hype about the housing boom though but further gains are certain to follow. Consumer credit was a little bit weak at only £0.4bn.

■ Better tone continues in UK lending data but SME finance still weak

The most encouraging detail of the data was the second successive month of positive lending growth on the key M4ex IOFC lending measure, at 1.5% 3mth pa after 2.1%. Moreover, the sectoral breakdown was better than last month's. The bulk of the improvement in lending last month was due to a surge in lending to other financial corporations (so money flows staying within the financial sector) but this month it fell. The driver this month was the pickup in lending to non-financial corporations (3.8% 3mth pa after only 0.3%). Lending to households continued at 1.3% 3mth pa in September.

Unfortunately, the news remained poor for SMEs a key target of government and BoE Funding for Lending initiative. Lending to SMEs fell yet again by £0.4bn after £0.6bn the previous month. Overall, the report is showing some better lending growth but a revival in SME finance is still lacking.

Brian HILLIARD