Lending to British business fell again in May while the number of mortgage approvals picked up slightly from weak levels in April, the British Bankers’ Association reported on Wednesday.

Lending to private non-financial companies, which form the backbone of British industry, fell by £1.3bn in May, slightly less than the average decline seen over the previous six months and a touch more than the drop in April.

Separately, retailers reported weak demand in Britain’s high streets in May, with sales in June below levels seen last year although not as weak as some had expected. The CBI’s monthly Distributive Trades Survey for June found that on a positive note, retailers remain upbeat with a balance of 11 per cent more expecting better sales in July rather than weaker sales.

Mortgage approvals for house purchases in May rose to 36,709 from 35,964 in April but remain below the average levels of the previous six months. Remortgage activity was even weaker in May than April. But in a sign that the pick-up in house buying activity late last year is trickling into retail demand, the CBI survey found that both durable household goods and furniture and carpet retailers reported higher sales in June 2010 than they had been the year before.

The annual growth rate of net mortgage lending – new loans minus repayments – stood at 4.3 per cent, unchanged from April. “The low interest rate environment is resulting in customers choosing to reduce or pay off borrowing, particularly personal loans, rather than saving,” said David Dooks, statistics director at the BBA.

Ian McCafferty, chief economist at CBI, the employers’ organisation, said that although footwear and leather goods distributors had taken the biggest hit among retailers, grocers had done well. “This may reflect consumers gearing up for the World Cup by stocking up on food, drink and new televisions,” he said.

But according to the BBA, consumers continue to pay back their debts more quickly than they take on new loans. In May, consumers repaid £5.9bn in credit card debts and borrowed £5.6bn. But because interest charged on unpaid balances counts as new borrowing, and rates continue to hover around 19 per cent against a 0.5 per cent Bank of England base rate, net consumer credit appeared to have risen slightly.

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