As a follow up to this earlier post banks expect to cut their lending to businesses in the run-up to Christmas at a rate not seen since the financial crash a decade ago.
A survey of the banking sector by the Bank of England showed that banks plan to reduce their lending in response to rising defaults and a fall in demand.
Banks have seen the biggest collapse in demand from commercial property companies, coinciding with the downturn in retail spending, which has hit shops and retail developments.
The Bank of England said banks kept credit lines open for smaller and large businesses in the third quarter but had seen an increasing reluctance among medium-sized businesses to extend loans.
“Lenders reported a slight decrease in demand for corporate lending from small and large businesses, and a decrease in demand from medium businesses in the third quarter” it said.
Michael Biemann, the head of property lender Selina Finance, said: “It’s a concern that default rates on credit cards and loans rose in the third quarter, and equally worrying that lenders expect even more people to start having problems with their repayments in the upcoming quarter.
“With money so cheap, there is a lot of debt out there and the worry is that for some people it is starting to prove too much, and at just the wrong time as we enter a potentially tough period for the economy."
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