The Bank of England has confirmed that the Funding for Lending Scheme (FLS) is to be extended into 2015.
Launched in August last year, the scheme was originally due to end in January 2014. It will now end 12 months later, despite many commentators criticising the initiative for failing to drive rates of business lending.
Under the present scheme, Scottish banks and other lenders are given £5 worth of lending for every £1 loaned to small businesses. Changes will see this rate lifted to £10 next year.
However, whilst the CBI Director for Competitive Markets, Matthew Fell, believes the scheme could contribute to business growth, he did urge caution, saying:
“Funding for Lending is only one piece of the finance jigsaw.”
Businesses themselves are increasingly recognising this too. Many are actively reducing their credit streams, for example.
Alternative Scottish commercial finance options are also being utilised, including factoring, which uses a firm’s assets to boost cashflow.
The scheme extension has been expected for some time, with Chancellor George Osborne mentioning it in his March Budget.
It has also received lukewarm support from the opposition. However, the Labour shadow Treasury minister, Chris Leslie, did warn that further action was required to address the economy’s woes.
The scheme extension came just days before it was confirmed that the UK economy had avoided entering recession for a third time. The Office for National Statistics revealed that GDP grew by 0.3 per cent in the first quarter of the year.