Concerns remain around awareness of scheme
The Bank of England and HM Treasury have today announced an extension to the Funding for Lending Scheme (FLS). This extension builds on the success of the FLS so far, and has three main objectives: to give banks and building societies confidence that funding for lending to the UK real economy will be available on reasonable terms until January 2015; to increase the incentive for banks to lend to small and medium-sized enterprises (SMEs) both this year and next; and to include lending involving certain non-bank providers of credit, which play an important role in providing finance to the real economy.
In a letter to the Chancellor, ahead of his budget statement this year, the Chamber emphasised the importance of easing access to credit for businesses, particularly SMEs. In our letter we detailed some of the concerns raised by businesses in our region, saying:
In spite of pronouncements to the contrary, bank lending to businesses remains insufficient. Net lending decreased by £2.4bn in Q4 2012 and it is clear that funding is still failing to reach new and developing firms. Project Merlin, the Government’s agreement with four of the high street lenders, set targets for lending to business which have repeatedly been missed.
We urged the Government to establish the British Business Bank without delay and to ensure that existing schemes had the full support to guarantee their success. For this reason we welcome these extensions to the Funding for Lending Scheme and are encouraged to see the Government committing to an existing initiative. Issues remain, however, and we believe the Government must take steps to ensure that these loans are effectively marketed to business in order to raise awareness of their availability. Again, we highlighted this problem in our Budget submission to the Chancellor, saying:
We were particularly disappointed to hear that one of the main high street lenders is either unwilling or unable to market Government guaranteed loans, with the result that business awareness of the schemes is poor. As with so many Government initiatives, (UK Export Finance suffers the same problem) poorly framed delivery has drastically reduced the usefulness of this scheme.
If you have any direct experience of the Funding for Lending scheme the Chamber policy team would be interested to hear your views on the usefulness and delivery of the scheme.