Small business lending has fallen 0.7 billion pounds under Funding for Lending

LAUNCHPAD: If banks can't use Bank of England cash to pump up the housing market, they would rather not use it at all.

by Rachel Savage
Last Updated: 28 Aug 2014

Banks are absolutely fine pumping money into the overheated housing market, but are still stubbornly refusing to increase loans to businesses. That is the pretty obvious conclusion that can be drawn from the latest Funding for Lending data, which shows net lending to small businesses under the scheme fell £723m in the first quarter of this year.

Seems politicians' prodding and poking of banks to help out the companies they call the ‘lifeblood’ of the British economy has been to little avail. Big businesses, meanwhile, got £2.1bn less out of banks.

Source: Bank of England

The dive in business loans follows Bank of England governor Mark Carney ditching the mortgage part of the FLS scheme last November (although the refocusing only kicked in in February), which allowed banks to borrow £1 super cheaply for every quid it leant to consumers, as the housing market got decidedly overheated yet again.

In total, banks drew down just £2.01bn from the scheme in February and March, a paltry sum compared to the £18.8bn in the last quarter of 2013, when they were still using it to fund mortgages. Lloyds, which increased net lending to small businesses by £536m in first three months of this year, accounted for £2bn of that by itself, although it decreased big company lending by that amount too.

RBS, on the other hand, is definitely not small businesses’ friend, decreasing lending by £737m at the same time as it increased corporate lending by £774m. Given the government still owns 64% of the bank, they might want to get poking a bit harder.

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