Funding for Lending, is it working?

By Richard Halstead on Dec 3, 12 05:18 PM in Economics

The Bank of England released the first round of data today on the Funding for Lending Scheme (FLS). The scheme was launched by the Governor and the Chancellor earlier this year with the aim of improving the net flow of credit to UK households and private non-financial companies.

Overall, the data released today for 2012q3 indicates a very modest positive flow of net credit to households and business

Unfortunately the FLS data does not distinguish between lending to households versus lending to companies but it is unlikely that this new lending was driven by businesses. The Bank of Englands Trends in Lending shows that net loans raised business reduced in q3 2012 suggesting banks have instead been focusing on increasing household and mortgage lending.

So while today's data shows FLS is having some impact on overall lending, this initial picture confirms our view that it is not the full answer to the UKs financial challenges.
The SME finance challenge remains - UK lenders need to reengage with SMEs and support them with their investment plans in challenging economic times.

EEF's Finance for Growth report outlines the need for the UK to establish a more dynamic lending environment for SMEs both within the banking sector and beyond it. The report outlines our recommendations for improving competition in the SME banking sector.

Recommendation 1:

To encourage lower costs, better T&Cs, and a higher standard of service, EEF urges the government to conduct a focused three month review on ways of bringing more private competition to bear in UK SME banking such as introducing an explicit switching incentive or creating a standard data portal for new challengers to assess potential new customers.

Recommendation 2:

In addition the government should use its new 'business bank' to create a retail challenger at scale to take the main incumbents dominating the SME banking landscape.

Business authors

David Bailey

David Bailey - Professor of Industrial Strategy at the Aston Business School, Birmingham
My postings | David Bailey's RSS feed My feed

Stuart Pemble

Stuart Pemble - Construction Lawyer, Mills & Reeve
My postings | Stuart Pemble's RSS feed My feed

John Clancy

John Clancy - Birmingham City Councillor and director of and
My postings | John Clancy's RSS feed My feed

John Samuels

John Samuels - Professor of Business Finance, Birmingham Business School
My postings | John Samuels's RSS feed My feed

Chris Tomlinson

Chris Tomlinson - Chris Tomlinson is the founder of social media and online PR agency Friend (
My postings | Chris Tomlinson's RSS feed My feed

Andrew Whitehead

Andrew Whitehead - Senior partner at law firm SGH Martineau, leading the firm's Energy & Climate Change practice.
My postings | Andrew Whitehead's RSS feed My feed

Keith Gabriel

Keith Gabriel - A Birmingham-based PR Account Manager
My postings | Keith Gabriel's RSS feed My feed

Beverley Nielsen

Beverley Nielsen - Lecturer, Design Management, at the Birmingham Institute of Art & Design, BCU
My postings  | Beverley Nielsen'a RSS feed My feed

Mike Loftus

Mike Loftus - Director of News from the Future Ltd. Writing on the trials of setting up your own business
My postings | Mike Loftus's RSS feed My feed

Richard Halstead

Richard Halstead - Midlands region director for EEF, the manufacturers organisation.
My postings | Richard Halstead's RSS feed My feed

Karl Edge

Karl Edge - partner at KPMG in Birmingham, specialising in automotive, manufacturing and house building sectors.
My postings | Karl Edge's RSS feed My feed

Peter Owen

Peter Owen - Managing director for construction firm Willmott Dixon Midlands.
My postings | Peter Owen's RSS feed My feed

Dr Steven McCabe

Dr Steven McCabe - director of research degrees for Birmingham City Business School.
My postings | Dr Steven McCabe's RSS feed My feed

Francis Greene

Francis Greene - Professor of Small Business and Entrepreneurship, at the University of Birmingham.
My postings

Alan Gilmour

Alan Gilmour - Director at Cogent Elliott, experienced in marketing, brand development and customer relationship management.
My postings

Paul Noon

Paul Noon - Paul Noon, OBE, West Midlands International Trade Director at UK Trade & Investment.
My postings

Latest Birmingham Post Lifestyle blog

Lifestyle Blog

Birmingham Post staff and guest bloggers from the midlands give you the lowdown on what's happening in your region and some musings on culture in the UK and beyond.

Keep up to date

Sponsored Links