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Funding for Lending extended for two more years

The Bank of England and HM Treasury have announced a two-year extension to the Funding for Lending Scheme.

Funding for Lending (FLS) was launched in 2012 and its scope has been redefined several times since then; most recently, it has been re-focused towards lending to small and medium-sized enterprises.


The extension promises to support further improvements in credit conditions for SMEs. However, this extension is part of a gradual phasing out of the scheme, with borrowing allowances reducing over time so as not to hinder economic recovery when it eventually closes in 2018.


According to the Bank of England, SME lending volumes have increased by £2.1 billion in 2015 so far, and net lending to SMEs by FLS participants was positive in the first two quarters of 2015. However, it says credit conditions for SMEs remain tighter than for large corporations.


Mark Carney, Governor of the Bank of England, said: 

"As conditions have normalised for particular sectors over the life of the FLS, 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."

Chancellor of the Exchequer George Osborne said: 

"I am pleased to say that we are extending the scheme until 2018, supporting more loans. Given the improvement we've seen in credit conditions for households and large businesses, as our long-term economic plan moves from rescue to rebuild it is right that we continue to focus the scheme's firepower on the small businesses that are the lifeblood of the economy."
John Allan, national chairman for the Federation of Small Businesses (FSB), welcomed the news and said: 
"Providing smaller lenders and newer entrants to the market with greater access to the scheme is a sensible move. It should help them compete with the bigger banks and over time, provide businesses with a wider range of finance options."

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