Bank lending down despite fund injection

Tim Wallace
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Small firms are still seeing less lending overall, but the rate of decline is slowing
BANK lending to businesses dived again in the third quarter, the Bank of England said yesterday, despite the economic recovery.

Institutions drew down almost £2bn from the Funding for Lending Scheme (FLS) in the three-month period – cheap funds intended to spur the provision of credit to businesses.

But net lending to firms fell by £2.4bn over the same period.

Net lending to small- and medium-sized enterprises (SME) fell by £128m in the quarter.

However, this is the smallest quarterly drop so far. In 2013, net SME lending fell by an average of around £1bn per quarter, which has steadily declined to below £400m in the second quarter.

Over 2014 so far, banks have taken £7.2bn from the scheme, but net lending is down £8.9bn.

Santander increased net lending to firms by the most over the three-month period, at £332m. Investec was next, with net lending up £130m, and Aldermore third with an increase of £82m.

By contrast RBS’ net business lending fell by £1.4bn.

Lloyds was the next biggest faller in the quarter, with net lending down £979m.

However, the bank maintained its longer-term aim is to increase lend­ing to firms.

“During the nine months until September 2014, Lloyds Banking Group’s SME net lending growth was £1.2bn, which is more than any other bank participating in the Funding for Lending Scheme,” said a spokesperson.

“Through our participation in FLS, we continue to offer one per cent discounts on loans to all our SME customers and that is helping us continue to grow our lending to the sector, by five per cent a year, net, at a time when SME lending across the banking industry is still falling.”