Just 13 lenders have made use of the scheme since its launch last August, which is designed to make cash available from the BoE to commercial lenders at lower-than-market rates – as long as they lend it. The worst part of the news is that these banks and building societies drew £13.8bn using the cheap credit scheme, but they simultaneously reduced their stock of loans to households and businesses by £2bn.
Vince Cable, the business secretary, said that the scheme ‘may need to be adapted,’ (sounds like it, Vince, yes) and told how he is soon to meet the Bank’s deputy governor Paul Tucker ‘to discuss how we can improve it.’
Of the lenders that have made use of the scheme, 10 did actually increase their lending, including Barclays, which has withdrawn £6bn from the scheme so far. But out of a possible total of £68bn, take-up so far has been pretty disappointing. Also, the reduction in loan stock is an average: RBS, Lloyds and Santander withdrawing massive amounts and reducing their loans drastically offset the lending of the others.
A spokesman for the Treasury said: ‘The [FLS] has already succeeded in reducing borrowing costs, with some mortgage rates at their lowest for five years.’ The figures suggest things aren’t as rosy as you think, Mr Spokesman…
Meanwhile, what we had hoped was just a January blip in the construction sector has turned out to be a dramatic climb down from otherwise positive-sounding figures. The Markit/CIPS Purchasing Managers’ Index has given a reading below 50 (which is seen as a contraction) for four months in a row now, but February’s figure – 46.8 – is the lowest it has been since October 2009.
Yes, folks, that means the rate of decline in the construction sector is increasing, and it also means that the January blip really wasn’t all that much to do with the snow. The chief executive of CIPS, David Noble, said: ‘There is barely a crumb of comfort in this month’s figures for the construction industry to ease the continued decline in performance.
‘The dramatic fall in civil engineering activity is particularly worrying, having been the one bright spot in the second half of 2012.’
Looks like we’re in for another sinkhole of a year.