UK firms pay back debts
BRITISH companies are paying down bank loans at a record rate, using the proceeds from a surge in capital markets fund-raising, Bank of England data revealed yesterday.
In the second quarter, British private non-financial companies paid off a net £15bn, including £3.6bn in June alone. They raised £21bn from the debt and equity markets.
So far this year firms have paid off more bank loans than they have taken out, the first time this has occurred since records began in 1997.
But Jamie Dannhauser of Lombard Street Research said: “The cash being generated by these issues is not being used for expansionary purposes but instead to restructure balance sheets.”
Peter Dixon of Commerzbank said: “The fact firms are paying off debt is an indication that they are less able to find finance to roll the debt over.”
The Bank’s preferred measure of broad money (M4) fell 0.6 per cent in June. Firms’ holdings of M4 rose £1.2bn in June, after falling £1.5bn in May.
Households’ holdings of M4 rose £3.5bn in June. With quantitative easing less effective than hoped, the Bank could look to extend it next week.