Funding for Lending Scheme failing to get banks lending

The coalition is still failing to get banks lending to businesses, new figures from the British Bankers' Association (BBA) reveal, despite the introduction of the government's Funding for Lending Scheme (FLS), which gives cheap funding to banks on the basis that they lend money to households and businesses.

The coalition is still failing to get banks lending to businesses, new figures from the British Bankers’ Association (BBA) reveal.

In total, lending to businesses dropped 5.7% in the year to January.

While not as severe as the 6.5% drop in December, it is deeper than the 4.1% fall in January 2012.

That figures come despite the introduction of the government and the bank of England’s Funding for Lending Scheme (FLS), which came in last August to provide cheap funding to banks on the basis that they lend money to households and businesses.

Net mortgage borrowing from the banks also grew by just 0.2% in the year to January, the slowest level of growth since BBA records began in 1997 – also significantly down on rates of 6% growth seen during the financial crisis of 2008.

Last month MPs criticised the FLS for having a “bias” towards mortgages rather than businesses, and expressed concern about reports that businesses were not benefiting from the scheme.

The Federation of Small Businesses also criticised the FLS in December, saying the scheme “does not increase access to credit” and that businesses looking for finance for the first time were now “more likely to be refused“.

Commenting on the latest report, BBA statistics director David Dooks blamed sluggish economic growth on the low level of banks lending.

“While general economic growth stalls, low consumer and business confidence generates a natural tendency to restrain borrowing appetite, repay borrowing where possible and to build up cash and savings as a buffer,” he said.

As Left Foot Forward recently noted, growth in the UK economy has stalled since around the third quarter of 2010 – coincidentally, at about the time George Osborne set out the coalition’s spending plans (20th October 2010).

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3 Responses to “Funding for Lending Scheme failing to get banks lending”

  1. LB

    Pretty simple reason. The government has changed the rules on capital. You need more capital to lend to risky businesses, so they won’t.

    Plus you’re taxing capital.

    Then there are large fines being imposed in the US on UK banks, and that comes of capital.

    Since the loans allowed are a multiple of capital, every pound of fines or tax is multiplied leaving to lower lending.

    Plus, the other lending, of the capital, has gone to the state whose spent it.

  2. Newsbot9

    No, because there’s no point investing when consumer confidence is this low.

    And thanks for the argument for the state spending more there.

  3. Umjapog

    It appears that neither the government nor the banks are serious about creating any growth in the economy. Why bother? The aim is to dismantle the welfare state: the more benefits can be reduced and cash diverted elsewhere, the sooner it will starve to death. Private services or none; Profits for the Boys; job done.
    What? Food banks on the increase, more children malnourished and living in poverty, the disabled and the old left in isolation, unable to make the contribution they could? Who cares? I refer you to the paragraph above: Profits for the Boys (the Big Boys, that is): job done.

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