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SME borrowing and FLS bank lending falls

Net lending by banks under the Government’s Funding for Lending Scheme (FLS) fell by £300 million in the first quarter of the year, data from the Bank of England (BoE) shows.

Just 13 of the 40 banks that participate in the FLS made drawdowns from the scheme in the three months to 31 March 2013, at a value of £2.6 billion.

The FLS aims to encourage more lending to businesses and individuals by allowing banks to reduce the cost of providing new loans by borrowing at lower rates from the BoE.

The news follows figures from the BDRC Continental SME Finance Monitor report, which showed that just 39 per cent of SMEs are using some form of external finance despite Government schemes such as the FLS and the Enterprise Finance Guarantee.

John Longworth at the British Chambers of Commerce called for the swift introduction of the state-backed Business Bank and said it was “…disheartening to see that the availability of external finance remains a barrier to growth for many businesses.”