Funding for Lending fails to increase lending to SMEs

Lending figures released by the Bank of England today have seen gross lending to small businesses fall to £18.4bn in the six months prior to February when the Funding for Lending Scheme was active. In the six months prior gross lending was £1.3bn higher at £19.7bn (release).

The Funding for Lending Scheme was introduced to make it easier for businesses to get access to credit, by cheapening its supply. Yet rather than just supporting loans to businesses, the scheme affects all loans. Allister Heath warned that such a policy could backfire when it was announced:

It could encourage dodgy lending, given that the Bank of England will underwrite some risks. It involves trying to plan the volume of credit by private banks. It aims to boost all forms of credit – but since when is the UK’s problem insufficient credit card borrowing?

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