Bank Loans to Business Fall Again Despite Funding for Lending

In spite of the Funding for Lending Scheme (FLS) the aim of which was to cope with fall of the UK bank landing, it still continues.

For the first quarter of 2013 net landing has fallen with £300m.

The opinion of banks is that they would make more loans in the second part of the year with better loan agreement clauses.

Now under the new scheme banks and building societies should only prove they would give the money to individuals or businesses and they could borrow it cheaply from the Bank of England.

The period for this scheme was extended by a year.

The latest figures showed that as the old loans were phased out, new lending was about to be granted.

The Bank’s executive director for markets Paul Fisher said:

“The picture of flat lending growth overall is broadly as expected at this stage, reflecting reductions in some legacy portfolios being roughly offset in aggregate by expanding new lending”.

Data showed that there are also banks and building societies like Barclays and Nationwide that have increased their loans.

The current trend has not changed much since the previous figures had been showed- the decline is still in the business landing while lending to individuals started improving.

The Bank of England said that the financial crisis had serious effect over three big lenders (RBS, Lloyds and Santander) and due to them the percentage in reduction of loans was that big.

The British Chambers of Commerce (BCC) was strongly disappointed with the figures.

“It is a concern that lending continues to contract despite the Funding for Lending Scheme having been in place for nearly a year,” said John Longworth, the BCC’s director general.

One example is an online estate agency, called hatched.co.uk, based at Hitchin in Hertfordshire.

It applied for a bank loan of £60,000 last year, but was eventually given just £20,000.

“For me, the bank funding just isn’t filtering through to small businesses like our own,” said the company’s managing director, Adam Day.

“And it’s small businesses like ours which are going to help the economy grow,” he said.

 

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