Yesterday’s announcement by George Osborne to revamp and expand the ‘Funding for Lending’ scheme (FLS) did not come as a surprise to many, in a desperate bid to increase economic growth throughout England. The scheme aims to give smaller and medium sized businesses more credit, by offering the major banks of England incentives to loan these smaller businesses money. The scheme has been extended from January 2014 to 2015, and the government have welcomed non bank lenders, such as leasing firms, into the scheme, due to recent figures revealing that non banking lenders alone contribute over £2 billion of capital to smaller and medium sized businesses.
The expansion of the FLS has been praised by many. After the fall of £8 billion in lending from the launch of the scheme in August 2012 to February 2013, plenty are hoping that the revamp of the scheme does not result in failure. The scheme had previously been accused of general profiteering for the banks; Treasury Minister Greg Clark is now placing a significant focus on ‘the availability of credit to the corporate sector’, with a ‘particular focus to small business lending’, deeming it to be ‘crucial to the economy’.
Certainly the FLS faces obstacles in its route to success – previous attempts of similar policies introduced by George Osborne, such as Project Merlin and Credit Easy failed, as did the initial introduction of the FLS. A combination of demand in consumerism for these businesses is essential to the success of the scheme.
Matthew Fell, CBI Director for Competitive Markets, sees the expansion and revamp of the scheme as an effective attempt to boost the confidence of these smaller businesses, but insists that awareness of such schemes need to be increased. Additionally, he regards the involvement of the major banks of England compulsory in the pathway to economic growth and success in the smaller business sector. For every £1 lent by banks and leasing firms to small/medium sized businesses, the lender will in return be offered £10 of subsidised state funding. The support of the tax payer is also crucial to success; if the nation is willing to back a scheme that pushes for economic progress, it appears as if the scheme will almost certainly be a triumph.
Chancellor George Osborne congratulated the revamp, regarding it a ‘big boost for small and medium sized businesses that are at the heart of the British economy’. It appears that George Osborne, and the rest of the nation, want the ‘heart of the British economy’ to progress economically to steer the country away from the tide of recession that is ever daunting, hoping that this time, the scheme put in place benefits those it is intended for.