Bank lending to fall, payday advance firms to reap benefits

With Ernst & Young stating that bank lending set to fall, hitting consumers hard for the first time in three years, payday advance firms are set to reap the benefits of the sudden vacuum in the quick loans industry.

E&Y’s research estimates have made the suggestion that businesses will be likely to bear the lion’s share of the contraction, with corporate sector lending could decvline by around 5.7 per cent in 2012.  In addition to commercial real estate and small businesses, personal customers will most likely be hit hard by the lending drop-off, especially those who are ineligible for standard credit terms, and many of these personal banking customers are expected to turn to instant cash loan companies in order to fulfill their needs.

A separate survey, conducted by the CBI, discovered that SMEs in the manufacturing sector found their orders drop at the steepest level in more than two years as the eurozone crisis sparked rising fears.  The survey also found that as output stagnated due to demand levels dropping through the floor in the last three months of 2011, optimism declined for the third month in a row.

The ITEM Club from Ernst & Young also issued warnings that the UK could be at the forefront of a financial transaction tax instituted by the EU, even in the event that the Government declines to adopt such a tax.  The ITEM Club’s senior economic adviser, Neil Blake, said that the last time that the economy was impacted by deleveraging of banks was in 2009, when the global financial crisis was in full swing.

Total bank loans are expected to contract in 2012 by 2.2 per cent, according to E&Y’s predictions.  2013 growth figures are predicted to be only 0.9 per cent, which is a massive difference from 2011’s estimated 4.3 per cent increase.

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