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Lending to businesses falls in first quarter

Category: Scottish Investment — Paul Morgan on April 28, 2013

The first quarter of 2013 saw a drop in the amount of cash being lent to businesses in the UK, according to figures from the Bank of England.

According to the data, there was a drop of £4.8bn to February, representing a 4.4 per cent drop off.

The figures reveal that lending to construction firms is an area seeing particular weakness

Lending in the house building sector fell by more than five per cent at the end of 2012 from the previous year’s data.

Some commercial finance areas are picking up the slack, however.

In Scotland, for example, Glasgow and Edinburgh factoring companies are eager to fund firms performing well.

The Bank of England also said that the Chancellor’s Funding for Lending Scheme (FLS) was not working as planned. It said that overall, less money was being leant to businesses by banks participating in the plan than they were a year ago.

The Bank of England did go on to say that it would take time for a positive effect to be seen however, and also said that access to mortgages had been improved.

The Council of Mortgage Lenders was in agreement. Its chief economist, Bob Pannell, said:

“The improvement in funding markets over the past year, reinforced by the incremental benefits of the Funding for Lending Scheme (FLS), has been the key catalyst behind stronger housing activity.”

In the same week as the lending fall was confirmed, news emerged that the FLS was very likely to be extended. The news came after George Osborne said in his Spring Budget that it was an option being considered.

'Disclaimer: The information contained in these articles is of a general nature and no assurance of accuracy can be given. It is not a substitute for specific professional advice in your own circumstances. No action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a consequence of the material can be accepted by the authors or the firm.

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