Business mulls one year of FLS

ONE YEAR ago today, the Bank of England launched its funding for lending scheme (FLS), with the intention of spurring loan activity.

Aside from a boost to the mortgage market, which has been partly attributed to FLS, lending to firms remains anaemic.

Though interest rates have dropped, Vicky Redwood, chief UK economist at Capital Economics, said that business lending is still falling around three per cent annually. She added: “There are factors other than the cost of funds at work. Banks are arguably still undercapitalised, firms and households are wary of borrowing more, with concerns about their incomes and the effects of the previous debt overhang”.

The Ernst & Young Item Club’s senior economic adviser, Carl Astorri, added: “Most of its impact has been on housing. There were 44,192 mortgage approvals in June 2012, in comparison to 57,667 this June, an increase of 25.9 per cent.”

Mike Cherry, of the Federation for Small Businesses, said: “Access for finance remains the biggest issue, rather than the cost to finance. That remains the real problem for our members”.