* UK mortgage approvals highest since Jan 2008 in Nov - BoE
* Lending to businesses suffers biggest fall since 2011
* Nationwide reports fastest rise in house prices in 4 years
* Construction PMI second-strongest in six years
By David Milliken
LONDON, Jan 3 Britain's booming construction
industry and fast-rising house prices suggest the economy
finished 2013 on a high but a sharp fall in business lending
raises doubts about how sustainable the recovery will prove.
Friday's lending, housing market and construction figures
from the Bank of England, major mortgage lender Nationwide and
data company Markit were all strong, as were Christmas sales
numbers from big clothing retailer Next.
However, the central bank and other economists say Britain
needs more exports and business investment to fortify growth in
2014 and shake off a dependence on consumers saving less and
Britain's economy grew at an annualised rate of more than 3
percent in the second and third quarters of 2013, and strong
fourth-quarter data could lead to the fastest full-year growth
since 2007 - something quite unexpected earlier in the year.
But while the central bank on Friday showed mortgage
approvals in November were their highest since January 2008 -
though still well below pre-crisis levels - net lending to
businesses took its biggest fall since comparable figures began
in May 2011.
"Overall the picture from the data today remains consistent
with a UK recovery that has been fairly household-led," said
David Tinsley, UK economist at French bank BNP Paribas. "We
would look for that to change in 2014, but a risk remains that
corporates will remain reluctant to borrow and invest."
Britain's housing market has been bolstered by falling
unemployment, low interest rates and government programmes to
make mortgages cheaper and easier to obtain.
This in turn has lifted confidence in the construction
industry, with Markit's survey of purchasing managers showing
only a slight slowdown in growth in December from November's
rate, which was the fastest since August 2007. Housing was the
strongest sector, though commercial projects picked up
Manufacturing data released on Thursday was also robust, and
a closely watched services survey due on Monday is forecast to
show sustained strength.
RISING HOUSE PRICES
Outright levels of construction remain low, however, and
Nationwide said the supply of new homes was not keeping up with
demand - contributing to an 8.4 percent annual rise in house
prices, the biggest since June 2010.
Prices rose 1.4 percent in December alone, the biggest
one-month jump in over four years and prices in London and
Manchester are up 15 and 20 percent respectively on the year.
At a national level, house prices are still 5 percent below
their pre-crisis peak. But this news is likely to concern
critics who fear programmes such as the recently-expanded Help
to Buy scheme - which led to an extra 6,000 mortgage
applications between October and December - are more likely to
pump up house prices than spur the building of more homes.
Bank of England Governor Mark Carney has warned that
Britain's housing market has the tendency to rapidly overheat,
and in November the central bank reined back a scheme that
offers cheap finance to banks, saying it will only help those
seeking to lend more to businesses.
The BoE is due to review Help to Buy in September, but
Carney has said it could make recommendations sooner if it felt
the scheme threatened financial stability.
Underlining the risks, Friday's data showed mortgage
approvals in November rose more than expected to 70,758 from
around 54,000 at the start of 2013, though below pre-crisis
averages of more than 90,000.
Business lending fell by 4.7 billion pounds ($7.73 billion)
and is almost 4 percent down on the year.
The BoE had no immediate explanation for the record fall,
other than that it was concentrated in larger firms. Lending to
small businesses rose by 140 million pounds.
Greater numbers of mortgage approvals - and subsequent house
purchases - have historically boosted economic confidence in
Britain and led to greater consumer demand.
However the management of Next, which revised up sales
forecasts on Friday, noted that wage rises still lag inflation
and spending growth has been funded by lower household saving.
"Any return to significant economic growth is likely to
result in rising interest rates which, in turn, is likely to
moderate spending of those with mortgages," it said in a trading
statement that was stronger than most of its rivals'.
With British output 2 percent below its pre-crisis peak -
lagging almost all other big advanced economies - the BoE has
committed to keep interest rates at a record low until
unemployment falls to 7 percent.
The jobless rate has fallen much faster than the BoE
forecast in August, meaning 7 percent could be reached as soon
as the end of 2014.
However, the central bank has stressed that whether interest
rates rise will hinge on medium-term inflation pressures such as