UK Firms Set To Drive Net Business Borrowing Into Minus Territory Over The Course Of 2021
by Liz Seyi Digital marketing managerWhile
there are many potential indicators of the improving state of ‘UK plc’ since
the end of the previous coronavirus lockdown restrictions during 2021, one of
the key ones might be the projected fall in net business borrowing over the
course of this year.
As
reported by Cambridge Network and elsewhere, it is predicted that net
bank-to-business lending in the UK will drop to minus £1.6 billion over 2021.
This
compares to the £35 billion net of corporate loans that were approved during
2020, in a sign that firms are paying down debt more quickly than had
previously been anticipated.
The
same forecast, however, also expects net bank lending to UK firms to go up
again in 2022, recording growth of 2.4%, which would amount to £11 billion net.
Nonetheless,
the picture shown by the last forecast is markedly different to the situation
in May, when it was predicted that firms in the UK would borrow an additional
£19 billion in net terms during 2021 to help keep them afloat during the
coronavirus pandemic.
Businesses get serious about repaying
debts and attending to their balance sheets
The
total stock of business debt overall is primed for a 0.3% fall this year, which
would be quite the contrast to the 8% increase seen during 2020.
However,
data from the Bank of England suggests that larger companies and
small-to-medium-sized enterprises (SMEs) have been paying down their debts at
somewhat different rates.
While
larger firms actually owed 2.4% less debt in October 2021 than they had in
February 2020, just prior to the start of the pandemic – £312 billion versus
£320 billion – SME debt over the same timeframe went up by 26%, from £167 billion
to £210 billion.
Looking
forward to 2022, the forecast of business lending growing by 2.4% during the 12
months is based on the assumption of more ‘normal’ economic conditions being
restored and firms turning their focus back to growth over the repayment of
debt.
As
far as business investment is concerned, 2021 has seen low activity, which
points to a year-on-year decline of just over 1%.
However,
with many firms that may contemplate investment now being in a relatively
healthy financial position, it is thought that – as long as the Omicron variant
of COVID-19 doesn’t drastically alter the economic picture – there could be a
strong rebound in investment during 2022, amounting to nearly 14%.
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Created on Feb 24th 2022 05:02. Viewed 152 times.