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Business loan defaults have dramatically increased

It has been reported by the Bank of England that loan defaults among medium to large companies has dramatically increased for the first time since 2009.  The Bank of England have predicted further rises in 2012.

Lenders surveyed by the Bank of England said the trend reflected a combination of deteriorating economic conditions and some companies having used up their room for remedial action.

Losses have been stable over the past three months for large and medium-sized companies despite the default, but were expected to rise in the coming three months.

In contrast, both default rates and losses given default were reported to have fallen for small companies in Q4 and were expected to be broadly flat in Q1.

Despite the rise in default rates, lenders expected broadly unchanged credit availability for large companies and an increase in availability for small businesses.

However, a further fall in credit availability is expected for the commercial real estate sector.

Across the corporate sector as a whole, a number of factors were expected to constrain corporate credit availability, including tighter wholesale funding conditions, the economic outlook and bank balance sheet pressures.

Review the full survey:

http://www.bankofengland.co.uk/publications/other/monetary/creditconditionssurvey120105.pdf

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