Banks are expected to ramp up their lending this year as the UK economy dodges the gloomiest recession predictions and the housing markets shows signs of some revival, according to a panel of top economists.
Total UK bank loans are now expected to rise 1.2 per cent this year, a net increase of £29bn, upgraded from a 0.1 per cent fall forecast in February, according to the EY ITEM Club UK Bank Lending Forecast.
Tumbling inflation, lower-than-expected energy bills and a resilient jobs market mean UK GDP is expected to swell by 0.2 per cent in 2023 rather than contracting, driving an increase in consumer and business borrowing.
Net mortgage lending is now expected to grow 1.2 per cent in 2023, up from 0.4 per cent in the February Forecast, according to the EY forecast.
Anna Anthony, UK financial services managing partner at EY, said the UK is “still on the path to economic recovery” but we are “in a more optimistic place than we were a few months ago”.
“The recession that many thought was inevitable is now likely to be avoided and energy prices have fallen, boosting consumer and business sentiment,” she said. “Despite recent volatility in the global banking sector, the EY ITEM Club has been able to upgrade its growth forecasts for UK bank lending this year, which is positive news.”
The crisis rippling through the US banking sector has also so far had “limited impact on the UK’s highly capitalised lenders”, EY’s economists added, though they said risks to the downside are “present within the forecast”.
