UK corporate lending is growing at its fastest pace in years, wrong-footing investors who have been braced for a credit slowdown, according to new Bank of England data analysed by UBS, the Swiss investment bank.
Corporate loans expanded 9.1% in the year to February 2026, a rate that analysts Jason Napier and Sanjena Dadawala at UBS described as completely at odds with prevailing sentiment and investor assumptions about credit demand.
The figures, drawn from monthly Bank of England lending data, show overall UK loan growth accelerating to 4.8% year on year in February, up from 4.5% in January and well ahead of the 2.4% recorded a year ago.
Corporate lending led the advance at 9.1% year on year, followed by consumer credit at 4.7% and mortgage lending at 3.5%, with all three segments growing faster than they were six or twelve months ago.
On a monthly basis, total loans rose 0.4% in February, with corporate borrowing up 1.4% and mortgages up 0.2%, while consumer lending edged back 0.2%.
The strength of corporate credit demand stands in stark contrast to the cautious tone dominating investor discussions about UK banks.
These have been weighed down by concerns over artificial intelligence-driven margin compression, rising unemployment risks, lower deposit spreads, and potential losses linked to loans made to non-bank financial institutions.
The UBS analysts noted that back-book loan yields, the interest rates banks earn on their existing loan portfolios, rose three basis points month on month in aggregate, with mortgage and consumer yields climbing while corporate yields continued to drift lower.
On deposits, volumes grew 0.2% month on month in February, driven by household sight deposits, while corporate deposits fell across both sight and time categories.
The overall UK deposit rate edged down to 1.96% from 1.98%, with UBS noting that only a third of the Bank of England's rate reductions since the peak in July 2024 have been passed through to depositors.
UBS rates Barclays and NatWest as buy among large-cap UK domestic banks, with Lloyds Banking Group on neutral. Shawbrook is the firm's top mid-cap pick, alongside buy ratings on Close Brothers and Paragon.
UBS has received compensation for investment banking services from companies covered in this report within the past 12 months. Investors should be aware the firm may have a conflict of interest that could affect the objectivity of this report.