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Published late last week, data for "The net quarterly flows of lending to UK businesses and the amount borrowed from the Bank [of England]", as stated on the Bank of England's website, illustrated that lending from the scheme was in the red once again.
The figures have shown that lending has decreased by £0.4 billion to small and medium companies and by £3.5 billion to large enterprises, bringing the total negative to close to £4 billion this time round, following a further decrease from the previous quarter.
Bank of England Chart showing net lending to SMEs (unweighted) by FLS Extension participants.
Despite the fall in bank funding costs which would have normally prompted a boost in lending, and despite the Government giving participating lenders access to a fiver for every pound lent to an SME, commercial lending continues to slow down.
Whether this is because the market has had its fill and is now in little need of credit, or because banks have been refusing more loans than before remains unclear.
The total outstanding balance since the scheme began in 2012 stands at £45.7 billion.
Commenting on the bank lending figures, Ian Currie, Director of corporate finance advisors, Seneca Partners, said: "The high street banks insist [Funding for Lending] is alive and well, but in reality its vital signs are those of a dodo. To be fair, Funding for Lending's failure is a puzzle. It gave the banks access to a cheap and plentiful supply of cash, and the demand for borrowing from businesses seeking to grow - or just manage their cashflow - has stayed strong.
"And yet the conventional credit pipeline has stayed blocked, and net bank lending to businesses is shrinking faster now than at the start of the year.
"But the principal roadblock lies within the banks themselves; it's the branch managers who have turned risk aversion into a mantra.”
After a series of embarrassing scandals in which large banks were accused of exploiting small businesses – colluding with auditors to drive companies into administration and sell their assets for profit on the loans they gave – the British high street bank may be risking its reputation as the trusted partner of the intrepid entrepreneur.
According to the Federation of Small Businesses (FSB), SMEs accounted for 99.9 percent of all private sector businesses in the UK in 2013, 59.3 percent of private sector employment and 48.1 percent of private sector turnover.
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