Further drop in SME lending casts more doubt over FLS

Posted on 28 Aug 2014 by The Manufacturer

Lending to UK SMEs has dropped for the second consecutive quarter, casting further doubt over the government's Funding for Lending scheme.

New figures published today showed that under the Funding for Lending (FLS) scheme, net lending fell by £435m between April and June.

It follows a decline of £719m in the first quarter, and marks further disappointment for the scheme launched in 2012 by the Treasury and the Bank of England.

Despite £3.2bn being drawn from the scheme, net lending fell by more than £4bn, including a £3.5bn decline in lending to large companies.

Lloyds topped the banks successfully lending to SMEs, drawing £2bn for the three months while lending £384m to small businesses.

John Longworth, director general of the British Chambers of Commerce (BCC), said that despite a reduction since the first quarter of 2014, the FLS scheme continues to disappoint.

“Despite the welcome re-focus towards SME lending, the real test for the scheme has always been whether it is able to get credit flowing to young and fast-growing businesses,” he said.

“Unfortunately many of these firms remain frozen out when it comes to accessing the finance they need to fulfil their potential. The Business Banking Insight (BBI) confirms that many SMEs are unhappy with the level of service they receive from their bank.

Mr Longworth added more needs to be done to fill what he described as a “major gap” in UK SME finance.

“These figures reiterate that much more needs to be done to fill major gap in the provision of SME finance in the UK, including increasing the role of equity and bond markets and delivering a Business Bank with a greater capital base than under current plans and the ability to lend directly to businesses.”