Demand for loans by European businesses hits four-year high

European businesses' demand for loans is at a four-year high and likely to lead to accelerated investment in industry and services this year and next, as long as the availability of credit is maintained, BusinessEurope has said.

The organisation, which represents business federations in 35 countries, said in its spring outlook that Europe’s economy would grow faster than it had previously forecast, principally due to the euro’s weakness and lower oil prices.

"We have indications that consumers are slightly more confident about the future. And companies are increasingly seeking money to finance new investments," the federation's director general, Markus Beyrer, told a news conference.

“But I fear that access to finance will become an increasingly biting constraint once the economy picks up,” he continued.

The European Central Bank’s ultra-low interest rates and money printing programme have eased funding conditions across the euro zone, but some policymakers have said a persistent lack of lending has been related more to demand than to banks’ ability to give credit.

BusinessEurope said its survey indicated that businesses’ projected demand for finance over the next six months was at the highest level in four years.

It said this should translate into investment growth of 2.8 per cent this year and 3.8 per cent in 2016.

Improvements in domestic and global demand were the prime reasons to invest, followed by the expected profitability of such investments and the attractive costs of finance.

The federation raised its 2015 forecasts for growth in the European Union to 1.9 per cent and for the euro zone to 1.6 per cent, from previous forecasts in October of 1.7 and 1.2 per cent respectively.

For 2016, it sees EU growth of 2.1 per cent and eurozone expansion of 1.9 per cent.

BusinessEurope said private consumption, boosted by low oil prices, would be an increasing contributor to growth, which has previously been driven more by net exports.

Consumer confidence in Europe has steadily increased since the end of 2014, while new car registrations have been on a rising quarterly trend since the first three months of last year.

- Reuters