Britain’s financial services sector is expected to stabilise this year, with lending increasing modestly to post the first year-on-year rise since 2010, according to the Ernst & Young Item Club.
The independent economic forecasting group expects lending to the non-financial sector to rise 1.8 per cent this year. In 2012 there was a fall in lending of 7 per cent to consumers and of 4 per cent to businesses compared with the previous year.
“Although 1.8 per cent growth in lending may seem modest, it will be the fastest growth in bank lending since 2010 and marks the beginning of the end of the painful period of deleveraging the banks have been forced to go through,” said Carl Astorri, senior economic adviser to the group.
The Item Club expects lending to pick up further in 2014.
Mr Astorri noted that write-offs of bank loans unlikely ever to be repaid in full peaked in 2012 and were now falling and that outflows of deposits from businesses in mainland Europe repatriating cash were easing. Those factors should make it easier for banks to resume their lending to the UK economy, he said.
The Item Club forecasts a challenging year for the insurance sector, with a slowdown in car ownership likely to weigh on growth in premiums. However, price rises are expected for insurance in the property, corporate and reinsurance markets.
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