LONDON: More British lenders plan to rein in the supply of credit to consumers in the next three months than at any time since the financial crisis, according to a Bank of England survey that may add to concerns about the UK economic outlook ahead of Brexit. A net balance of 18.8% of British lenders expect to tighten the availability of unsecured credit to consumers in the next three months, the BoE’s quarterly credit conditions survey showed. The last time the BoE conducted the quarterly survey, 7.9% of banks said they planned a similar tightening. The new result marked the biggest proportion of lenders planning to tighten consumer lending since the end of 2008, when Britain was mired in recession. The economic outlook was reported as by far the biggest drag on plans for credit supply.
UK consumer credit expanded strongly last year, helping to sustain spending by households that fuelled strong economic growth after last June’s vote to leave the EU. However, yesterday’s figures will add to worries about the outlook for consumers, who have become increasingly pressured by rising prices after the pound’s fall following the Brexit vote and a rise in global oil prices. The survey also showed weaker business investment exerted a “significant drag” on demand for credit from businesses.
British manufacturers reported the fastest export growth in more than two years in early 2017 and the services sector racked up its strongest sales growth since last June’s Brexit vote, a separate survey showed. The British Chambers of Commerce, which runs the UK’s largest quarterly private-sector business survey, said firms reported a robust short-run outlook. But there was much more uncertainty about the medium-term as well as fears of sharply rising costs. Britain’s economy bucked most economists’ expectations that it would slow sharply immediately after the vote to leave the EU. Exporters have been in a positive mood helped by a recovering global economy and a fall in the value of sterling. A similar message came from smaller companies, whose morale rose to its highest since late 2015, according to a survey also released yesterday by the Federation of Small Businesses. However, the FSB said a quarter of small businesses would be deterred from exporting to the EU if they faced any tariffs after Britain leaves the bloc in 2019.