Small businesses in Scotland could be set for a lending boost, as George Osborne comes under increasing pressure over the policies he has overseen.
It is understood that the Funding for Lending Scheme (FLS) is to be extended. Launched in August 2012, it was set to come to an end in January of next year.
The decision comes as the International Monetary Fund (IMF) questions Osborne’s austerity measures. The downgrading of Britain’s triple-A status rating by Fitch Ratings in mid-April is also thought to have forced the issue.
The stripping of the top rating comes just weeks after fellow ratings firm, Moody’s, knocked the UK back to an Aa1 rating.
Intended to boost lending through the provision of cheap loans to banks, the FLS has already come in for some criticism, however.
The Bank of England has said that banks are in fact lending less since the scheme came in than before.
The availability of commercial finance lending has promoted many forms of alternative finance to take a hold in the market though. Invoice finance options, like factoring, are proving incredibly popular.
The Chancellor believes an extension is the right action though, first mentioning it in his March 2013 Budget. The Bank of England’s Monetary Policy Committee also said an extension could provide “merit”.
A final decision over the scheme’s extension is expected to be made in May, as the IMF begins to gather in London ahead of its regular round of consultation meetings.
