The Bank of England has released figures today that show UK bank loans to business are still decreasing, despite the UK government’s Funding for Lending Scheme (FLS).
According to the Bank of England, net lending declined by GBP300m in the first quarter of 2013, a drop in comparison to the fall of GBP2.4bn recorded in the previous quarter. However, while loans to businesses dropped, lending to individuals increased and the Bank said more loans would be available later in 2013 from banks and building societies participating in FLS. New lending is under scheme expected to expand, while legacy portfolios are phased out.
The Funding for Lending Scheme, designed to boost lending and get the economy expanding, was launched by HM Treasury last August and is currently available to 40 banks. The scheme allows banks and building societies to borrow money cheaply from the Bank of England, providing they pass that money to individuals or businesses. FLS has recently been extended until January 2015 and other financial bodies are expected to widen the scope of the FLS in 2014.
According to the Bank of England, banks had borrowed an additional GBP2.6bn under FLS in the first quarter this year and the amount that has been made available so far totals GBP16.5bn. The UK government reportedly expects GBP70bn to be available in the future.
According to reports, certain banks and building societies increased net lending in the first quarter, these were led by Nationwide, with the biggest rise in net lending of GBP1.2bn; Barclays net lending rose by GBP1.1bn; Coventry Building Society showed an increase of GBP581m; while Virgin Money increased by GBP561m and Tesco Bank on GBP558m. However, lending from other banks such as RBS, Santander and Lloyds has fallen, with Santander seeing a drop in net lending of GBP2.3bn; the Royal Bank of Scotland falling by GBP1.6bn; and Lloyds Banking Group lending decreasing by GBP983m.