New figures from the Bank of England show that lending to small and medium-sized enterprises (SMEs) through the government’s Funding for Lending Scheme (FLS) declined again in the second quarter of 2014.
The latest statistics show that net lending to SMEs under FLS fell by a further £435 million in Q2 2014, further highlighting the scheme’s issue in releasing much-needed finance to innovative and growing small businesses.
Launched in August 2012 by the Bank of England and HM Treasury, the scheme was aimed to encourage lending to SMEs by providing cheap loans to banks, which they in turn can use this to increase the number of loans and mortgages they provide to entrepreneurs and small firms.
The drop in loans is even more disconcerting when you factor in the rule change announced in September 2013, regarding liquidity requirements, designed to encourage £90 billion of additional funding to SMEs.
However, the drop in lending to SMEs was even more drastic in Q1 2014, which saw a £723 million decline, suggesting that a slight improvement in prospects could yet be on the horizon.
Numerous business leaders have voiced their concern at the Bank’s latest figures, insisting that the Government needs to invest more time and effort to ensure the eventual success of the scheme.
Phil Orford, chief executive of the Forum of Private Business, said: “The Funding for Lending Scheme shows another net reduction of funds reaching small businesses.
“These figures would surely be worse still if Funding for Lending was not in place, and it is true there is a weakness in demand, but it remains disappointing to see less money being lent in this crucial part of the economy.
“Without more lending to small businesses their growth and the country’s growth will remain slow. Politicians of all parties need to have a hard look at the lending sector ahead of their conferences in September and October.”
Nicola Horlick, CEO of alternative finance platform, Money&Co, said: “Today’s figures shows that UK SMEs are still starved of the finance they need.
“Despite efforts to boost business lending through the Funding for Lending scheme, these latest figures reveal that the banks are still not doing enough to give SMEs adequate funding.
“Access to finance is the basic test of our economy’s ability to support growth. However, the traditional financial establishment continues to deprive SMEs of the funding they need, and UK businesses continue to struggle.”
Image: SouthEastern Star
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