The amount UK businesses borrowed from UK banks, and financial markets in the form of bonds, equity and commercial paper, increased significantly in January, by £9.2 billion (Chart 1). Within this, additional borrowing from banks increased sharply by £5.3 billion, continuing the relative strength seen over the past three months. Issuance of commercial paper (a form of short-term borrowing from financial markets) was also strong, increasing by £3.8 billion in January, slightly higher than December’s strong outturn. In contrast, bond markets (a longer-term form of borrowing from financial markets) saw little activity in January. Both gross issuance and repayments were small, and net issuance was around zero. Net equity issuance was negative for the sixth month in a row.
Seasonally adjusted
1 There is a discrepancy between the total of net finance raised and its components due to the seasonal adjustment methodology.
The increase in bank lending to businesses was driven by lending to large businesses. This increased £4.3 billion in January, significantly above the recent levels, driven by M&A activity. Bank lending to small and medium sized enterprises (SMEs) increased by £0.2 billion in January. The annual growth rate of borrowing by businesses increased sharply for large businesses, to 6.4%, and marginally for SMEs, to 0.5% (Chart 2).
Seasonally adjusted
Consumer credit (Tables B and C):
The extra amount borrowed by consumers to buy goods and services increased to £1.1 billion in January (Chart 3), slightly above the £0.9 billion monthly average since July 2018, but below the £1.5 billion average between January 2016 and June 2018. Within this, credit card lending picked up after a weak December and other loans and advances increased slightly on the month.
Given these weaker flows over recent months the annual growth rate of consumer credit has continued to slow. It was at 6.5% in January, well below its peak of 10.9% in November 2016. Within this, the growth rate of credit card lending fell to 6.7%, whilst the rate of other loans and advances was at 6.4%.
Mortgage market activity continues to be broadly stable, as it has since 2016. Net mortgage borrowing by households fell slightly on the month to £3.7 billion, but was slightly below the £3.9 billion average of the past six months. Mortgage approvals for house purchase (an indicator of future lending) increased in January to 66,800, slightly above the average of the previous six months of 65,500. Approvals for remortgaging ticked-up to 50,400, marginally higher that the recent average of 48,900.
The total amount of money held by UK households, private non-financial corporations (PNFCs) and non-intermediary other financial corporations (NIOFCs) (broad money or M4ex) fell £3.6 billion in January. This weakness was driven by a sharp fall in money held by NIOFCs. However the increase in households’ money holdings was also weak at £1.6 billion, well below the £3.4 billion average of the previous six months. The weakness was mainly due to an outward flow of non-interest bearing instant access savings accounts. In contrast, the £1.8 billion increase in money held by PNFCs was in line with its £1.7 billion average seen over 2018.
Summary tables
Highs and lows