Businesses erring on side of caution when borrowing, UK Finance says
Businesses continue to keep a tight control on their purse strings, erring on the side of caution when it comes to borrowing, although overall sentiment is still upbeat, according to industry body UK Finance.
According to the business lobby group, in January firms' borrowings shrank by a "slight" 1.4% year-on-year, with increased lending to manufacturers offset by contractions in borrowings by construction and property-related sectors.
"Business sentiment remains positive with confidence in short term trading conditions buoyed by the recovery in international markets. Investment levels remain broadly unchanged and borrowing continues to err on the side of caution, as companies adopt a 'wait and see' attitude to trading uncertainties, opting to use their deposits as buffers for spending decisions," said Stephen Pegge, Managing Director of Commercial Finance at UK Finance.
Consumer borrowing patterns on the other hand were somewhat mixed, with credit card borrowing little changed but gross mortgage lending registering a slight acceleration.
Card spending was 5.8% higher last month when compared with the same month one year ago, although higher levels of repayments following the holidays meant that, at 4.8%, the rate of growth in personal borrowing was little changed.
To take note of, households were described as being cautious in their spending as a result of wage growth running below inflation.
Gross mortgage lending meanwhile increased a bit more quickly last month, rising at a 9.7% pace year-on-year to reach £21.9bn, UK Finance said in a statement, with customers reportedly moving to take advantage of the mortgage deals on offer at the end of 2017.
Commenting on Monday's figures, Samuel Tombs at Pantheon Macroeconomics cautioned against assuming that January's bounce back meant it was 'business as usual' for the housing market.
For starters, he expected the average fixed rate five-year mortgage rate to increase by roughly 60 basis points over the coming six months.
On top of that, he reminded clients that the Bank of England's Term Funding Scheme was set to lapse starting from the end of February.