The government is failing to encourage lending

The executive director for Bibby Financial Services, says: “In superseding the national loan guarantee scheme, ‘Funding for Lending’ is proof that the Government’s approach to supporting small businesses has been failing.

“Over the past few years we have seen a raft of different schemes and initiatives introduced to address a shortfall in lending to businesses, but worryingly net bank lending to SMEs has fallen in every month of this government.”

Mr Winterton said that even with the introduction of ‘Funding for Lending’, the government continues to overlook the recommendations laid out in the recent Breedon Report, which called for a greater focus on alternative funding options and a lesser reliance on bank funding.”

He said: “Their insistence to channel funding streams through the banks in an attempt to support businesses is failing to address the core issue – what is being done to support firms which have been and are being overlooked by the banks.

“Questions must be asked as to whether an increase in the availability of low-cost funds will do anything to benefit those businesses which are classified by traditional lenders as ‘high-risk’.”

Mr Winterton added that the Bank of England must closely monitor not only the levels of lending, but where the money is going to ensure this scheme does not become another of the Government’s futile funding projects.

He added: “On top of this, the government needs to focus on building business confidence and encouraging more firms to invest in growth, be it with the support from the banks or from alternative funding providers.”