Bank lending to hit six-year low

Bank lending to businesses will hit its lowest level this year since 2006, despite government efforts to stimulate lending, a report suggests.

The Ernst & Young Item Club forecasts that business lending will fall by 4.6% to £429bn in 2012 from last year, the fourth consecutive annual decline.

Banks say demand for loans is low, while many businesses argue banks are unwilling to lend.

Last month, the government announced a business bank to boost lending.

This is the latest in a long line of measures the coalition and the Bank of England has introduced to try and encourage banks to lend more.

In August, the Bank launched its Funding for Lending scheme to try to make loans cheaper. All the UK's major banks apart from HSBC signed up to the initiative.