There’s a small silver lining and a pretty dark cloud in today’s Funding for Lending Scheme figures, announced by the Bank of England.
The silver lining is that the rate of decrease – yes, decrease – in lending fell in 2014, compared to 2013. So the banks have been retreating more slowly from their government mandate to lend to and support small and medium-sized businesses in the UK.
Now for the cloud: FLS lending fell by £800 million in the fourth quarter.
The FLS was launched in mid-2012 to provide cheap money to banks specifically earmarked for onward lending to British businesses. It was re-purposed in early 2014 to concentrate on small business lending.
Total lending to businesses in the last quarter fell by £6.9 billion.
The figures have, inevitably, drawn criticsim from the alternative finance sector. Nicola Horlick, CEO of P2P marketplace lender Money&Co. said: “Today’s figures paint the same sad picture: the banks aren’t doing nearly enough to help British business. Instead they’re acting as a buffer, dam and stopper by preventing finance from filtering through to those who need it.
“It’s important that while this remains the case, we encourage owners of small and medium sized businesses to recognise the benefits of other funding routes. Alternative finance is the best thing to happen to British SMEs and investors in a long time. According to a report published by EY and the Judge Business School at the University of Cambridge earlier this week, peer-to-peer (P2P) business lending grew by 250% and reached almost £733m in 2014. Despite this, awareness is still low, and we must ensure that all SME owners are aware of the benefits alternative finance can bring.
“Banks can be part of that solution, but only if they start working with the alternative sector.”