U.K. Banks Seen Lending More to British Companies This Year

U.K. banks may increase lending to British businesses in 2013 for the first time in four years, according to research by Ernst & Young LLP’s Item Club.

Lending to companies may rise by 3 percent to 440 billion pounds ($681 billion) this year and by 8.5 percent in 2014, after a drop of 5 percent in 2012, the London-based economic forecasting group said today. Declining bad loans and better access to wholesale markets will trigger the increase, it said.

“Behind the scenes banking fundamentals have quietly been improving and banks are now in a better position to be able to provide funds to the wider economy,” said Andy Baldwin, head of financial services in Europe, Middle East, India and Africa, at Ernst & Young.

Chancellor of the Exchequer George Osborne’s Funding for Lending Scheme, a program to boost lending giving banks access to about 82 billion pounds of cheap loans, will help restore confidence and stimulate demand from consumers and small companies, Ernst & Young said. Britain avoided a triple-dip recession in the first quarter with a 0.3 percent rise in gross domestic product.

-- Editor: Jon Menon

To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net.

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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