A new report from the Bank of England released this week revealed that bank lending to businesses plunged in a single month by $8.5 billion in June, the sharpest fall ever recorded since the bank began its monthly reports in May 2011.
The drop compares with a more than $1.3 billion increase in business lending the month prior, according to reports. The statistics were released along with reports that mortgage and consumer lending jumped in June.
Reuters said that the sharp decline could be a wakeup call to investors and policymakers. “While the lending data is often volatile, the fall could be a concern for policymakers who say business lending is key to the continued resurgence of Britain’s economy,” the newswire said.
But analysts also pointed out that the decline in traditional bank lending could be attributed to the rise in alternative financing to corporate borrowers. In an interview with Reuters, IHS Global Insight economist Howard Archer said that the data suggests this may be so.
“It is notable that the fall in lending was concentrated in lending to larger companies, which the British Bankers’ Association reported have been making use of capital market finance in preference to bank borrowing,” he told the newswire.
U.K. policymakers have taken up the fight to improve businesses’ access to financing as traditional banks slowed down their loan approval rates in the wake of the financial crisis, a trend seen throughout much of the world. These efforts have spawned the launch of so-called challenger banks, new market entrants that aim to boost competition in the banking sector, as well as the rise in alternative lenders.