Member Article

Lending down despite £14bn funding for lending stimulus

Net lending through the Government’s Funding for Lending scheme was down by £2.4bn in the final quarter of 2012.

Figures published by the Bank of England show that although banks borrowed as much as £14bn through the scheme, lending was down. The Treasury maintained that the scheme was having a positive impact on borrowing costs.

The British Bankers’ Association released separate figures showing total lending to businesses had fallen, although the group insisted appetite for borrowing was low among SMEs.

BBA chief executive Anthony Browne, said: “There are some signs that this might be about to change: the Bank of England’s latest credit conditions survey expects credit demand from small and medium sized businesses to rise in 2013 and businesses are indicating offers such as FLS make them more likely to consider investing.”

Katja Hall, CBI Chief Policy Director, said: “Despite the headline fall in lending, businesses tell us the scheme is having a positive impact on the cost of finance. So far the effect has been strongest in the housing market, but businesses are also benefiting.

“It’s particularly encouraging to see that several newer entrants have increased their lending, boosting competition and choice in the market.

“We must remember that the scheme is operating against the headwinds of bank deleveraging and muted confidence in the economy, which are reflected in the headline lending figures.”

The Forum’s Chief Executive, Phil Orford, said: “It’s hard to draw any firm conclusion from these figures, with Q4 lending traditionally muted anyhow, but with net lending at -£2.4b, and with borrowing costs rock bottom, these figures will likely prove to be disappointing.

“We appreciate the FfL money will take time to filter through, but businesses are desperate for this cash now, and the anecdotal evidence from our members is that bank lending is far from where it needs to be, and all too often the banks remain extremely risk averse.

“We are starting to hear the banks and the government making the case that the cash is there, but businesses are not asking for it. If this is true, and we’re not convinced, it would support our previous argument that untold damage has been done to traditional relationship banking methods and that firms are still wary of traditional lenders. You can hardly blame them though, and it could take years for those wounds to heal.”

This was posted in Bdaily's Members' News section by Tom Keighley .