"Financing projects from £50,000 to £100 million"

Funding for Lending Scheme continues to disappoint

Funding for Lending Scheme continues to disappoint

More concerns are being raised about the effectiveness of the Government Funding for Lending Scheme after the Bank of England reported that net lending to business slumped by £3 billion in April.

The recent fall in lending is the third in the last four months, while April’s £3 billion fall (£1.2 billion seasonally-adjusted) was more than double the average drop of £1.3 billion experienced each month for the last six months.

Lending to small businesses fell by £700 million, showing the persistent difficulty in securing business finance, while the average rates paid on new commercial loans rose to the most expensive level since last October.

Trends continued from earlier sets of figures, with taxpayer-supported lenders among those most culpable for the lending cutbacks. Lloyds cut lending by around £1 billion, despite having taken out £3 billion from the scheme, while the Royal Bank of Scotland has taken out £750 million but reduced lending by £1.6 billion.

Santander continues to cut lending at the most severe pace – by £2.3 billion in the first quarter – as ongoing problems in Spain cause the UK arm of the bank to act reticently.

And the troubled Co-op is also in the spotlight after figures showed that it took out £900 million in the first quarter – over a third of the industry total – only for lending to fall by £12 million over that period. The Co-op recently announced a suspension of all new business lending as it seeks to address its capital shortfall (read more).

The usual blame-games have continued following the release of the figures. Banks are blaming a lack of demand from a business economy still low in confidence, while businesses are blaming risk-averse lenders who, they say, are only interested in lending to the safest of businesses.

It was hoped that the launch of the Funding for Lending Scheme in August would make it easier for companies to gain access to credit.

Instead, the figures are likely to prompt concerns about the sustainability of the recent upturn in economic growth as net lending continues to fall.

Tuesday, 04 June 2013 10:45
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