LONDON (Reuters) - A post-Brexit vote slump in demand for bank lending among small and medium-sized British firms continued into the last three months of 2016 and banks expect small companies will remain reluctant to borrow in early 2017, the Bank of England said.
But demand for bank borrowing by large companies was unchanged in the three months to mid-December, stabilising after a significant fall in the third quarter, the BoE's quarterly Credit Conditions Survey showed.
"Significant reductions in capital investment and commercial real estate were reported to be the main factors contributing to changes in corporate lending demand in Q4, while merger and acquisitions activity has pushed up on demand," the Bank said.
The BoE has been watching for signs that uncertainty about Britain's planned departure from the European Union will hurt business investment and weigh on overall economic growth.
The BoE also said the availability of mortgage lending was flat in late 2016, although demand for buy-to-let borrowing rose significantly despite tax changes introduced in April which were partly designed to cool the market.
The Bank said overall mortgage availability was expected to increase slightly over the three months to mid-March.
Unsecured credit increased slightly in late 2015 and was expected to decrease in early 2017, the survey showed.
Top BoE officials said this week they were keeping a close eye on strong growth in consumer borrowing which has drawn some comparisons with previous unsustainable increases in household debt.
Reporting by William Schomberg, editing by David Milliken