Bank extends scheme to help smaller business borrowing
The Bank of England said it will extend a scheme to encourage lending by banks for a further two years, sharpening its focus on small businesses.
It said it will extend its Funding for Lending Scheme (FLS) to the end of January 2018, before being phased out completely, instead of coming to an end in January next year. The scheme, which was launched in 2012, allows commercial lenders to borrow at a cheap rate from the central bank.
Since the programme was launched it has been increasingly narrowed to focus on small firms, who are the backbone of the UK, but find it more difficult than larger businesses to obtain bank loans.
The Bank said that lending for small businesses had increased by £2.1bn this year so far, but it acknowledged that "credit conditions for small and medium sized enterprises (SMEs) remain tighter than those for large corporations."
The Bank and the Treasury said FLS will continue alongside other measures to boost lending to small firms, such as the expansion of the Government's British Business Bank, also founded in 2012 to help fund start-ups and fast-growing firms.
Bank of England governor Mark Carney said: "Since its launch in 2012, the FLS has provided an important source of funding support to banks, which has flowed through to improved credit conditions across the economy."
Chancellor George Osborne added: "As conditions have normalised for particular sectors over the life of the Funding for Lending Scheme we have consistently reduced the scope of this temporary scheme and focused support where it is needed most.
"The announcement today continues that tapering, supporting continued improvement in SME credit conditions as the economic recovery takes hold, while gradually withdrawing that support over the next two years."