Banks ‘lending more to small firms’

High street banks are lending more to small businesses, according to the British Bankers’ Association (BBA).

New data from the BBA suggests that the amount of money lent to enterprises increased by £153 million in May, while deposits from small firms rose by £250 million.

In addition, more than 45,000 new small business banking relationships were established during the same month, the organisation said.

‘The small business sector saw another monthly increase in its borrowing from the high street banks in May, while reduced trading activities and greater control of liquidity were reflected in increased deposits and little-changed overdraft levels,’ commented David Dooks, BBA statistics director.

However the group’s findings conflict with the official figures released by the Bank of England, which show that new bank lending to enterprises actually fell in both April and May.

Last month Deputy Governor of the Bank of England, Paul Tucker, said that it would be difficult to ascertain whether banks were truly lending more to businesses until later in the year.

He also claimed that lending remained weak and warned banks not to hoard funds until they are sure the worst of the recession is over.