The Bank of England admitted on Monday that the supply of credit to small businesses was still constrained even though the amount advanced in the third quarter was the highest since the flagship funding for lending (FLS) scheme was introduced in summer 2012.
A week after Threadneedle Street said the FLS, which offers banks and building societies cheap funds to pass on to customers, would refocus on business lending, the latest quarterly update showed £5.5bn funds had been taken by lenders in the three months to end the of September.
Howard Archer, chief UK and European economist at IHS Global Insight, said this had resulted in net lending – a measure of the amount of credit remaining in the economy – of £5.8bn in the third quarter. “It was more than three times net lending of £1.6bn in the second quarter, which had followed drops of £1bn in the first quarter and £2.9bn in the fourth quarter of 2012,” Archer said.
But lending to small businesses contracted, prompting the employers’ body the CBI to call for new ways of funding small businesses to be created and the manufactures body the EFF to demand more competition in banking.
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