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

Funding for Lending Scheme benefits mortgages over businesses

Funding for Lending Scheme benefits mortgages over businesses

The effectiveness of the Government's Funding for Lending Scheme has come under scrutiny again after new figures from the Bank of England suggested that net lending to businesses has continued to fall in favour of mortgages.

The Bank’s latest figures showed that net lending to businesses had fallen by £2.3 billion during the three months to August.

Though it did not release specific figures, it added that lending to small businesses had fallen by £600 million in the second quarter.

However, mortgage lending has soared in 2013. Gross mortgage lending rose to an estimated £49.3 billion in the third quarter, according to the Council of Mortgage Lenders – an increase of almost a third from the third quarter of 2012.

The 17.6% leap in mortgage lending during the third quarter is the highest quarterly leap in five years, the CML added.

The figures continue a trail of disappointment for businesses. Earlier in the year, net lending was reported to have fallen by £3 billion in April alone (seasonally adjusted to £1.2 billion), with lending to small businesses falling by £700 million (read more).

The trend illustrates the difficulties in securing commercial finance, despite a scheme designed to support the fortunes of businesses as well as households.

The Bank of England and the Treasury confirmed an extension to the Funding for Lending Scheme in April, with Chancellor George Osborne insisting that there would be additional incentives for lenders to increase lending to SMEs.

The effects of this are not likely to become evident until further figures are released.

Tuesday, 22 October 2013 10:53
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