Is the cash finally starting to flow

During the first quarter of 2010 credit availability for businesses increased with signs that the increase will continue over the next three months according to Britain’s lenders which responded positively to a new survey conducted by the Bank of England.

The latest Conditions Survey from the Bank reported that the demand among SMEs for credit rose much stronger than predicted, but remained the same for larger companies.  Demand is expected to also continue to rise over the second quarter.

However, for the first time since the credit crunch occurred, lenders reported that loan default rates unexpectedly fell among medium and large businesses.  However, for small companies loan default rates remained the same.

However, even though credit may be more available Capital Economics staffer Vicky Redwood said the picture is still not overly optimistic stating that the positive survey results are not showing the pick-up net lending growth because of the amount of firms that are repaying their debt thus it does not accurately show that there will still be a slow credit growth rate in the future for awhile.

Secured credit issued to households stayed the same during the first quarter for the most part although demand for household credit fell.  Lenders believe that this may be due to various factors such as heavy snows and the close of the stamp duty holiday.

However, Barclays Capital member Varun Bhabha said that other factors may have played a role such as concerns over the post tax income outlook in a market where labour opportunities are unstable.