Lending to businesses slumped 1.2 per cent in the 12 months to June – the first time that the rate has declined in over a decade.
The Bank of England figures come as the Bank has spent almost all of its £125 billion budget to try to boost the money supply with its unprecedented quantitative easing (QE) programme.
According to the data, lending to firms, such as loans and overdrafts, dropped £1 billion between May and June, or 0.2 per cent. It is the third consecutive monthly fall for the measure and took the annual rate of lending into negative territory for the first time since records began in September 1998.
Howard Archer, of IHS Global Insight, said: “This suggests that banks are still reticent in their lending to companies.”
When QE was launched in March, the idea was that “high-powered” money would underpin bank balance sheets and unclog lending in the wider economy.
Banks have come under pressure from Chancellor Alistair Darling in recent days to increase loans to firms and keep interest rates low.
Mr Archer said that while recent survey evidence, including the Bank of England’s Trends in Lending report for July, have suggested that banks are becoming modestly more prepared to step up their lending, “there is currently still little evidence of this in the latest data”.
“The Bank of England has repeatedly stressed that it will take time for QE and other policy measures undertaken by both the bank and the Government to fully feed through to support bank lending,” he said.
“There continues to be little hard evidence of this so far, which is potentially worrying for recovery prospects if the situation persists.”