An increase in the amount of overdraft repayments made by large companies has seen the total outstanding loans to UK businesses fall by £5.5bn in June; following 6 months of increases averaging £0.2bn per month. The figures were flat for small to medium sized businesses, which means that the fall was concentrated primarily on large organisations and enterprises, with the business services sector seeing the biggest decrease of £4.4bn.

Although a number of analysts have said that the results, which also saw an increase in the number and total value of mortgages during the period as well as an increase in household borrowing, were positive, they still did not come close to the levels that were experienced just before the global crisis struck. A number of reasons were mooted for the decrease in business borrowing, including good housekeeping, an increase in the issuance of corporate bonds, and a greater use of invoice discounting to raise funds, instead of borrowing.

Invoice discounting sees a business getting an advance on the money that they are owed from customer invoices before the invoice is actually due for payment. Banks that have been reticent to lend money using overdrafts and loans have encouraged businesses to use this form of corporate financing, and even though lenders are more inclined to lend now, businesses have continued to use this as a viable means of borrowing the working capital that they need to grow, expand, or invest.

Furthermore, expected interest rate increases mean that a number of large corporations have chosen to repay overdrafts now, in order to avoid higher costs in the future, which has also seen the official business debt levels decrease significantly. David Dooks of the British Bankers’ Association pointed to professional services firms issuing corporate bonds to the tune of £3.6bn in the first half of this year alone as another reason for the drop.

Average quoted mortgage rates dropped to 2.56%, while consumer borrowing also increased. Household borrowing rose by £3.8bn in June and is now at its highest level since 2008, although annual growth only increased to 2.6% from 2.5%.