Total loans in the UK are expected to rise 1.2% this year, a net increase of £29bn. This represents an upgrade from a 0.1% fall forecast in February. The EY ITEM Club UK bank lending forecast says that falling inflation, lower-than-anticipated energy bills and a resilient jobs market mean UK GDP is expected to increase by 0.2% in 2023 rather than contracting. In turn, this is driving an increase in consumer and business borrowing.

A new opportunity to invest, grow and develop more sustainable business models

Laimonas Noreika, founder of HeavyFinance said: “With the UK’s improved economic set to see bank lending surging, companies have a new opportunity to invest, grow and develop more sustainable business models. As the global race to increase low-carbon green investment continues, UK firms need to think again about the steps they can take to reduce C02 emissions.

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“The wider industry needs to consider how to use external finance to further improve key areas like agriculture and farming, modernising processes as well as saving time and money,” he added.

UK SMEs must invest in automation and effective marketing platforms

Sjuul van der Leeuw, CEO of Deployteq added: “With banks increasing access to finance, UK businesses will have the opportunity to access the funding they need to invest and grow the skills of their workforce. As confidence in the economy recovers, key to SMEs achieving rapid growth will be looking again at key tools like automation and effective marketing platforms to empower staff and win new customers.

“Ambitious businesses cannot afford to operate a ‘business as usual’ approach when it comes to marketing and new business. Turbocharging growth requires the latest technology platforms. This enables businesses to reach new customers and increase their market share.”

UK net mortgage lending now set to rise in 2023

Net mortgage lending is now expected to grow 1.25% in 2023. This is up from 0.4% in the February forecast, according to EY.

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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. Energy prices have fallen, boosting consumer and business sentiment. 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 US banking sector crisis has also so far had “limited impact on the UK’s highly capitalised lenders”, notes EY. EY’s economists add that risks to the downside are “present within the forecast”.