Funding for Lending has been one of the government’s big schemes to help get the banks lending again. However, to date it hasn’t brought about the reinvigoration that had been hoped for. However, George Osbourne is expected to announce an extension to the Funding for Lending scheme in a bid to boost lending to small businesses. With the economy still on shaky ground in terms of growth, it’s hoped that more lending for SMEs will mean stronger growth, and therefore good news for the UK as a whole.
Originally, the Bank of England scheme was launched in August and due to expire in January next year. However, as the Chancellor faces growing pressure on his austerity programme, he’s now going to be announcing a boost to the scheme. The UK has recently been stripped of another triple-A status and the Chancellor is facing growing pressure from the IMF alongside this making it a tricky time for all involved in planning for economic growth. The extension to the Funding for Lending Scheme might be announced before the International Monetary Fund IMF arrives in the UK to begin regular annual consultations with the government next month.
The Funding for Lending Scheme was designed to boost lending to small businesses and households by providing banks with cheap loans on the conditions that these rates are passed on to customers, therefore meaning that more are able to afford cheaper borrowing from the banks.
So far, there have not been the huge results that have been hoped for. There has been criticisms that the banks were passing on less money overall in the second half of 2012 than they were in the previous 6 months. Hopefully with an extension to the scheme there will be more time to build positive results.