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

Funding for Lending Scheme to support businesses in 2014

Funding for Lending Scheme to support businesses in 2014

The Bank of England has announced that a lending scheme which has revitalised the residential mortgage market will focus on business lending from January next year.

The Bank said that the Funding for Lending Scheme, which was launched last year, will be amended so that it is no longer aimed at homeowners.

Instead, it will focus on business lending in a bid to restore faith in the banking sector.

Recent figures suggest that net lending has fallen between July and September following a sharp drop in the level of lending to businesses.

And confidence has been rocked by allegations that state-backed banks have pushed small businesses into administration in order to seize their assets at knockdown rates and sell them on for profit.

The Funding for Lending Scheme has incentivised banks and building societies to lend by making funds available to them at a cheaper price that they would find in the wholesale market.

But the scheme has primarily benefited the residential mortgage market over commercial lending.

And with the additional stimulus now provided by the Help to Buy scheme, which was introduced last month, the Bank said that further support to the residential mortgage market was “no longer necessary”.

But commercial lending remains a concern, as more details of the UK’s economic performance have emerged.

New data confirms that the economy grew by 0.8% in the third quarter, but that this was caused by a boost in consumer spending. Business investment, meanwhile, has risen by just 1.4% - some distance below the level seen last year.

Lee Hopley, the chief economist at manufacturers’ organisation EEF, said that action was needed, otherwise there would be 'a mountain to climb’ for business investment to achieve the official forecasts for 2013-14.

Thursday, 28 November 2013 11:53
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