UK SMB Funding for Lending Still Negative

Take-up of the Bank of England’s Funding for Lending scheme is still negative, despite billions lent to banks.

While net lending by banks taking part in the scheme to small and medium-sized enterprises (SMEs) was slightly less negative in the second quarter of 2014, at -£400 million ($663.5 million), than the previous quarter, it was still a negative number, and is unlikely to quell critics of the scheme.

The scheme was launched two years ago by the Bank of England, in an effort to boost funding for small and medium enterprises, as well as mortgages. Banks were lent money at low interest rates, to encourage them to lend it out in turn to small businesses and consumers. There is still close to £45.7 billion outstanding in loans taken out through the initiative.

UK economy to grow at fastest rate since 2007
However, it proved more successful at enabling mortgage lending than lending to businesses – so the Bank stopped the scheme for mortgages and extended it for businesses.

“These new Funding for Lending figures again show that growth ambitions are not being translated into demand for finance, especially for smaller businesses that have not been able to capitalize on cheaper credit,” John Allan, national chairman of small business group the Federation of Small Businesses, said in a statement.
“While Funding for Lending has had an impact on the price of credit, the trend in lending suggests there remain issues with credit allocation through the banks.”

Still, funding for SMEs by the banks taking part in the scheme has continued to be negative.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza