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| Banks cut loans again, in spite of Funding for Lending | Banks cut loans again, in spite of Funding for Lending |
| (35 minutes later) | |
| UK banks have continued to reduce the amount they lend, in spite of government attempts to reverse the trend. | UK banks have continued to reduce the amount they lend, in spite of government attempts to reverse the trend. |
| Latest figures from the Bank of England show that net lending fell by £300m in the first three months of 2013. | Latest figures from the Bank of England show that net lending fell by £300m in the first three months of 2013. |
| However, the figure is a big improvement on the previous quarter, when lending fell by £2.4bn. | However, the figure is a big improvement on the previous quarter, when lending fell by £2.4bn. |
| The government's Funding for Lending Scheme (FLS), launched last August, was designed to boost lending. | The government's Funding for Lending Scheme (FLS), launched last August, was designed to boost lending. |
| Under the scheme, banks and building societies are allowed to borrow money cheaply from the Bank of England, providing they pass that money to individuals or businesses. | Under the scheme, banks and building societies are allowed to borrow money cheaply from the Bank of England, providing they pass that money to individuals or businesses. |
| FLS was recently extended by a year, until January 2015. | FLS was recently extended by a year, until January 2015. |
| Pick up | Pick up |
| The Bank of England said that banks had borrowed an additional £2.6bn under the scheme in the first quarter, taking the total amount that has been made available so far to £16.5bn. | The Bank of England said that banks had borrowed an additional £2.6bn under the scheme in the first quarter, taking the total amount that has been made available so far to £16.5bn. |
| When FLS was launched, the government said it expected that up to £70bn would eventually be made available. | When FLS was launched, the government said it expected that up to £70bn would eventually be made available. |
| The Bank of England said Monday's figures showed that new lending was coming on stream, as old loans were phased out. | The Bank of England said Monday's figures showed that new lending was coming on stream, as old loans were phased out. |
| "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," said Paul Fisher the Bank's executive director for markets. | "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," said Paul Fisher the Bank's executive director for markets. |
| He said he expected new lending to pick up further through the rest of 2013. | He said he expected new lending to pick up further through the rest of 2013. |
| Some banks and building societies have increased their loans. Barclays and Nationwide were among the lenders to increase their loan book, while RBS, Santander and Lloyds reduced the amounts they lent. | |
| In a statement issued after the Bank of England's figures were released, RBS said it was "punching above its weight" in business lending. | |
| "RBS has increased lending to the real economy by nearly £1bn in Q1 2013, which includes a £600m increase in our business lending - our strongest performance since the scheme launched," it said. | |
| HSBC has not taken part in FLS to date, preferring to finance loans from its own resources. | HSBC has not taken part in FLS to date, preferring to finance loans from its own resources. |
| 'Out in the cold' | |
| The Bank of England said the latest figures reflected the continuing trend of an improvement in lending to individuals, but a decline in lending to businesses. | |
| It said one reason for this was that some lenders had reduced their exposure to commercial property, which makes up a significant proportion of their lending. | |
| It also said that most of the reduction in loans was down to three big lenders (RBS, Lloyds and Santander) who were cutting back as a result of the financial crisis, or in order to qualify for state aid. | |
| But the British Chambers of Commerce (BCC), which represents over 100,000 businesses in the UK, expressed disappointment 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. | |
| "The real test for Funding for Lending is whether it is able to get credit flowing to young and fast-growing businesses. Unfortunately many of these growth firms are still being left out in the cold," he said. | |
| 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. |