UK businesses borrowed £35.5bn in net terms last year, with a further £26bn forecast by the end of 2021, according to EY.
The professional services firm’s latest ITEM Club forecast noted that this is £25bn more than was borrowed on average over the previous five years, before the onset of the pandemic.
While bank lending – including Covid-related government-backed loans – has been vital to businesses of all sizes, for small and medium-sized enterprises (SMEs) it has been particularly critical.
Following continued lockdown restrictions, it is predicted that many businesses are unlikely to start making inroads into repaying their debt until 2024.
Government mandated restrictions have also had a considerable impact on bank lending to households, with net lending via credit cards and personal loans turning negative in 2020, falling by 9.9% – the largest drop since records began in 1994.
In addition, while demand for consumer credit is expected