Bank of England lending failing to filter to SMEs

BCC chief John Longworth left frustrated by decline

The Funding for Lending Scheme (FLS) saw the amount of cash lent to small firms by banks and other lenders drop £128 million.

John Longworth, director general at the British Chambers of Commerce (BCC), said he was frustrated that overall FLS lending to SMEs continues to fall.

“While larger companies continue to access the finance they need, the door often remains closed for young, high-growth firms – stunting the growth prospects of the very businesses we need to help secure our economic future,” Longworth said.

However, the decline was an improvement on the previous quarter, when lending to small and medium-sized businesses fell by £435m.

For the latest period, total business lending by banks and building societies using FLS fell £2.4 billion – compared with £3.9bn in the previous quarter.

The bulk of this decline was in lending to large corporations by Royal Bank of Scotland (RBS) and Lloyds Banking Group, both partly taxpayer-controlled, following a run-off of non-core parts of their operations.

Lloyds bucked the trend in the small business arena, where its net lending rose £304m in the quarter, and by £1.2bn in the first nine months of the year.

RBS’s net lending to SMEs fall by £165m amid an overall drop in its business lending of £1.4bn. Santander achieved the biggest rise in overall lending with growth of £332m, including £107m to small businesses. Aldermore’s SME growth was £73m.

FLS was launched in 2012, giving banks and building societies access to cheap finance in return for lending to households and businesses.

Changes announced by Bank of England governor Mark Carney last November, which fully came into place from the end of January 2014, meant the scheme would no longer apply to household loans, amid fears of an overheating housing market.

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