Osborne set to extend flagship Funding for Lending Scheme until 2015
22nd April 2013 | News
Chancellor, George Osborne is poised to announce the extension of the Bank of England’s flagship Funding for Lending Scheme (FLS) by a further year to 2015.
Under the original agreement, unveiled last summer, the FLS was expected to conclude in January 2014, but the Treasury and Bank have worked hard to extend the £80bn scheme to asset-based lenders, invoice finance houses and leasing firms to further ease the strain on the SME sector.
As the primary alternative to bank debt, asset finance remains the lifeblood of many SMEs, allowing firms to lend money against invoices and machinery.
The Chancellor is hopeful the extension to the FLS will provide a much-needed confidence boost for a sector that accounts for almost half of all private sector employment.
The announcement is expected to follow the release of latest GDP figures, which are predicted to reveal the economy grew by 0.1 per cent in the first quarter of 2013, escaping a triple-dip recession.
Speaking in Washington last week, Osborne confirmed there would be an announcement on the FLS "fairly shortly".
"It [FLS] has been a success and has underpinned credit in the last year and has contributed to a reduction in bank funding costs," he added.
Asset finance is steadily growing, according to new figures. The Finance & Leasing Association revealed asset finance raised £21bn in 2011 and supported £12bn of investment by small and medium-sized businesses.
A nine per cent increase has been forecast in 2013 to £18bn by the Asset Based Finance Association, following a six per cent increase in 2012. However, the industry remains well short of its level of investment of round £30bn prior to the economic crash.
Mark Carney, the incoming Bank of England Governor, has confirmed that many other central banks are using the FLS as a benchmark for financing the SME sector.
"A number of central banks around the world are looking at [the FLS] and looking to emulate aspects of it," he said.