(1888PressRelease)
September 29, 2007 - Banks are set to cut loans to UK companies for the rest of 2007, according to a study conducted by the Bank of England.
The study, which surveyed 30 banks, showed that controls on lending are set to tighten during the remainder of the year as the economic turmoil arising from the US sub-prime mortgage crisis worsens.
Some 49 per cent of those surveyed indicated they are set to tighten their credit supply during the next three months, while 20.2 per cent said they had done so in the last quarter.
The report said: "Lenders expected, on balance, a further significant tightening of price and non-price terms on loans to the corporate sector over the next quarter."
Commenting on the figures, economic research company Global Insight told the Telegraph that the survey would fuel expectations that the Bank of England will cut interest rates by the end of year.
An analyst from the firm said: "This tightening of conditions increases the downside risks to business confidence, investment and employment over the coming months, and is likely to increase expectations that the Bank of England could trim its benchmark interest rate before the end of the year."
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