By Jonathan Davies

Bank lending to businesses is set to rise this year for the first time since 2008, according to economic forecasters EY Item Club.

The report said a £4.3 billion rise in lending in the first half of 2015 suggests a rise this year, although it is expected to be around 0.25%.

Lending peaked at £575bn in 2008 and has fallen every year since.

"With the economy growing at a steady pace and business investment set to rise at an annual average of 6.5% over the next three years, the forecast suggests that the days of lending contraction are in the past," said EY Item Club.

It also said that mortgage lending would rise an average 3.8% a year until 2019 - double the growth seen between 2010 and 2014, but below pre-crisis levels.

Andrew Goodwin, senior economic advisor to the EY Item Club, said: "With homeowners set for the sixth year running of historically low borrowing costs, the demand for mortgages should continue to grow healthily, albeit at a far from spectacular pace.

"But while a low interest rate environment is good news for consumers, the prospect of a further year of squeezed interest margins is not what the banks were hoping for."