05/03/13

Business disappointment at lending figures

by business editor Trevor Sturgess

Business leaders are disappointed by falling lending figures under a government-trumpeted scheme.

The Bank of England revealed the Funding for Lending scheme - designed to help businesses and home buyers, but widely condemned for slashing savings returns - paid out £2.4 billion in the three months to February, down £1.5bn from June.

The scheme is credited with kick-starting the mortgage market but failing to help businesses as much as anticipated. Weak demand has also been cited for the lower figures.

Roger House, chairman of the Federation of Small Businesses in Kent and Medway (pictured right), said the figures reflected the difficulty small firms faced in seeking finance.

"It is clear that Funding for Lending is benefitting the mortgage market more than the small business sector, so we would encourage the government and the Bank of England to see how new and challenger banks can use the scheme better," he said. He praised new banks for looking more favourably on smaller firms as a way of helping them attract new customers and grow.

Christopher Shaw, chief executive of alternative finance provider Platform Black, said the figures made "a mockery of most of the big banks' claims about being willing to lend."

The Forum of Private Business claimed that as borrowing costs were at rock bottom, the figures were disappointing. It was not convinced that demand was weak, saying that untold damage had been done to traditional relationship banking methods and that firms "are still wary of traditional lenders".

The CBI, the employers' organisation, said the scheme's impact was strongest in the housing market, but added businesses were also benefiting. It admitted the scheme was operating "against the headwinds of bank deleveraging and muted confidence in the economy".

Lloyds Banking Group insisted it was continuing to grow lending, including to small and medium enterprises (SMEs) where there had been 4% year on year growth.

Gareth Oakley, regional director for Lloyds TSB Commercial Banking, said: "Between September and December 2012 we committed £11bn of FLS eligible lending through our discounted offers. We have pledged to lend at least £5bn to SMEs in 2013 and we are offering 1% discounts to all SMEs for the life of their loans. We have also promised to lend £6.5 billion to first time buyers."