‘Business as usual’ for commercial and household lending in the UK

There has been little change in borrowing patterns among UK consumers and businesses since the EU referendum, according to figures released on Wednesday by the British Bankers’ Association (BBA).

The trade association for the UK banking sector said that the report for July, reflecting the period immediately after the vote to leave the European Union, shows that net mortgage borrowing and consumer credit annual growth were identical to the figures in June at 3% and 6% respectively.

Meanwhile, business borrowing picked up in July following a mild contraction in June, and household and business cash deposits continued to grow at a rate similar to that seen in the previous two months.

“The data does not currently suggest borrowing patterns have been significantly affected by the Brexit vote, but it is still early days. Many borrowing decisions will also have been taken before the referendum vote,” explained Rebecca Harding, chief economist at the BBA.

“We are also clearly still a nation of shoppers and the Brexit vote has done nothing to change the fact that we use credit cards for short-term purchases. Strong retail sales figures appear closely associated with strong consumer credit growth.”

In the business sector, the report shows that borrowing by non-financial companies increased by ?2.3bn in July after a small fall in June.

Harding noted that business borrowing is not following the same pattern as business confidence. The data shows a clear upward trend in business borrowing for the last few months, indicating that the decline in June was a blip, probably caused by pre-Brexit nervousness.

“All of this suggests that, for the UK borrower, whether commercial or household, it is business as usual for the time being” Harding concluded. “There is no panic exodus or lock down in borrowing but, as many of the decisions to borrow could well have been made before the Brexit vote, we really should look for longer term trends before we can draw any conclusions.”