The urgency of the Government’s £80 billion efforts to funnel credit to the economy was underlined today after another big fall in business lending.
According to the Bank of England’s latest Trends in Lending report, loans to businesses fell by £3 billion in the quarter to May.
Net lending to small businesses has been negative for the past year as repayments outstrip new loans, its figures showed. The cost of loans for small and medium-sized businesses also became more expensive as chaos in the eurozone piled pressure on banks.
Bigger firms are finding it easier as they can raise funds from capital markets, but net lending to larger businesses was still down in three of the past four quarters.
The Bank and the Treasury have launched a Funding for Lending scheme, which will see banks borrow from Threadneedle Street at below market rates, as long as they boost lending to business. The more they lend, the cheaper the funds on offer will be.
Christopher Shaw, chief executive of alternative finance provider Platform Black, said: “The banks’ claims that they are open for business and willing to lend are sounding ever more hollow. For all the Bank of England’s quantitative easing largesse, precious little of the newly created money is getting through to the real economy.”
