UK Banks Increase Lending to Business
Funding for Lending (FLS) scheme
launched last August by the government and the Bank of England, boosted the flow of credit to households and businesses in the fourth quarter of 2012, the BoE’s latest Credit Conditions Survey shows.
The survey showed a 26.2% increase in the availability of credit to the household sector in Q412, compared with a 21.9% rise seen in Q3. The BoE said that the increase had been driven in part by the FLS scheme and that lenders expect a “further significant increase” in credit availability to households over the next three months, with the survey showing a net 24.7% of lenders expecting an increase in household credit availability in Q113.
The BoE also reported a significant increase in credit available to the corporate sector in Q412, with a net 29.4% increase compared with the 5.5% fall recorded in Q3. Lenders see a 14.9% increase in corporate credit availability over the next three months. The survey noted that medium and large companies had seen the biggest increase in credit availability during Q4, while small firms had also seen a ‘slight’ increase.
Lenders expect to see a modest rise in demand for credit from small and medium-sized enterprises (SMEs) in Q113, but broadly unchanged credit demand from larger companies.
Vicky Redwood, economist at Capital Economics said that the survey provided further evidence that the positive impact of the FLS was building. “What’s more, the beneficial effects are spreading to the corporate as well as mortgage market,” she added.
However, Howard Archer, economist at IHS Global Insight, said signs that smaller companies may not benefit from the scheme as much as larger and medium-sized firms were disappointing, “given that it is a lack of available and affordable credit to smaller companies that has been of particular concern.
“The implication is that banks remain very cautious about lending to smaller businesses in the current difficult and uncertain environment,” he said.