By Jonathan Davies
Small business lending suffered its biggest drop since records began in June, according to the Bank of England.
Lending to small, non-financial businesses in the UK fell by nearly £5.5 billion in June, more than at any point in the last four years when records began.
It compares with a £818 million rise in May. The Bank of England said it did not have any evidence to suggest why small business lending fell by such a large amount.
Small business lending is considered to be one of the key drivers behind the economy. The Bank of England's Financial Policy Committee was recently given a new remit by the Chancellor George Osborne to stress the importance of lending to small businesses, which make up 99% of companies in the UK.
However, lending to small and medium-sized enterprises (SMEs), which employee up to 250 people, rose by £353m.
Kevin Caley, CEO of investor connectors ThinCats, said: “SMEs might take some solace from today’s figures showing that they are slowly being given more financial backing. However, this is only a small improvement and there is certainly a lot more to be done for UK SMEs, who still face a serious lack of financial support in order to grow.
“The peer-to-peer finance sector has been expanding rapidly to fill this lending gap, which clearly demonstrates the on-going need for viable alternative sources of finance and supports the view that the market opportunity is both permanent and very large. Over £500 million of new consumer and small business loans have been provided by peer-to-peer platforms since April, the fastest rate of growth yet and the most rapid growth is in the business lending sector. The success of the peer to peer sector is clearly justifying Government support and encouragement by stepping up to meet the challenge and fill the gap left by the banks.”