LONDON: A surge in overdraft repayments by larger companies pushed down sharply the value of outstanding loans to non-financial businesses in June.
Bank of England figures published showed a fall of £5.5bn in outstanding lending to non-financial businesses, the biggest drop since the BoE began collecting the data in 2011.
This compares with an average monthly increase of £0.2bn over the previous six months.
The drop was concentrated mainly in the business services sector, where lending fell £4.4bn in the month. The BoE definition of the sector includes business such as accountancy and consulting and support services such as leasing.
Lending to small and medium-sized businesses was flat, meaning the contraction took place among bigger companies.
Andrew Connors, head of midmarket commercial banking at Lloyds, dealing with companies with turnover of between £25m and £100m, said businesses were increasingly raising finance from invoice discounting, which allows a company to borrow against sales invoices before customers have paid.
Invoice discounting lets companies borrow a certain percentage of their order books, so borrowing increases with sales volumes.
Mr Connors said there were no signs that companies were cutting business investment, adding he remained upbeat about the outlook for growth.
David Dooks, statistics director at the British Bankers’ Association, said the pattern of reductions suggested “good housekeeping by large corporates”.
In the first half of the year, a number of larger companies had turned to the capital markets instead of borrowing from banks, he noted.
