August saw a large reduction in debt repayments by individuals and businesses in the UK, which caused net lending figures to rise, according to the Bank of England. This is likely to be temporary, as further data suggest net lending declined again in September.

Net lending to businesses in August increased for the first time since February – by £0.3bn. This number – the difference between gross lending and repayments to lenders – reflects repayments falling more quickly than gross lending, which also fell on a quarterly basis. Businesses have been keen to repay their debt – to reduce leverage, perhaps, or to reduce the debt stock that will need refinancing for smaller businesses.

A similar picture is painted for secured lending to individuals. Net lending in August rose significantly – by £1.7bn – but other data suggest the net flows fell again in September. Again, the net figure does not suggest an increase in lending: gross lending remains broadly unchanged and even fell slightly, but repayments increased. Indeed, “household demand for secured lending for house purchase was reported to have fallen unexpectedly in 2010 Q3, according to the Credit Conditions Survey, though demand for buy-to-let investments rose slightly for the first time since 2008 Q3.” Read more