Bank of England data from August to the end of December showed that just 13 lenders used the scheme, which was designed to help revive the economy by lowering borrowing costs and increasing the supply of credit for households and businesses, reports The Telegraph.
Economists described the figures as “disappointing” and Vince Cable, the Business Secretary, repeated his call for changes to the scheme, telling BBC Radio 4’s World at One that “it may need to be adapted”. He will be meeting Paul Tucker, the Bank’s deputy governor, “to discuss how we can improve it”.
The 13 lenders that tapped the FLS reduced their stock of UK loans by £1.88bn. Of those, 10 did increase lending but their efforts were more than offset by massive withdrawals by Royal Bank of Scotland, Lloyds Banking Group and Santander.
The FLS was launched on August 1 to help the economy by using taxpayer subsidies to reduce banks’ funding costs, which were supposed to be passed on to borrowers. In the first instance, the scheme was expected to cut lenders’ costs by about one percentage point a year, handing them a subsidy of £138m on the £13.8bn of FLS drawings so far.
The Treasury and the Bank claimed the savings had started to come through on mortgages, but that it was too early to judge whether businesses were benefiting.