SME lending up for first time since mid-2011

 
Tim Wallace
Follow Tim
SMALL business lending has increased for the first time in almost two years in a new sign that the Bank of England’s funding for lending scheme (FLS) may be having an effect at last, Bank figures revealed yesterday.

Mortgage lending also edged up in the month, though it remains well below pre-crisis levels.

The FLS pumps cheap funding into banks in an effort to increase lending to the private sector and get the economy going. But officials fear it has been slow to take effect and so have extended the scheme to run until the end of next year.

Loans secured on houses increased £430m in the month on a seasonally adjusted basis, a little slower than the £790m increase in February.

SME lending increased £239m on the month, reversing the previous month’s £225m fall and the first rise since August 2011. However lending to larger firms fell £1.04bn in the month, continuing the sector’s downward trajectory and dragging overall business loans down £800m in March.

“The figures contain a few positive signs that the FLS is having a positive impact on borrowing, including the first rise in lending to SMEs in nearly two years,” said Capital Economics’ Samuel Tombs.

“But overall, the impact of the FLS has remained disappointing so far and it looks set to remain insufficient to foster any more than a feeble recovery in overall borrowing this year.”