Net lending by FLS participants went down by £0.3 billion during the first quarter of 2013.
The FLS aims to encourage more lending to the UK economy by reducing funding costs for banks and building societies, enabling them to reduce the price of new loans and therefore increase net lending.
The Bank of England says that, since the start of 2012, lending flows to individuals have typically been positive, whereas net lending to businesses of all sizes has mostly been negative.
Paul Fisher, executive director for markets at the Bank of England, says, ‘The picture of flat lending growth overall is broadly as expected at this stage reflecting reductions in some legacy portfolios being roughly offset in aggregate by expanding new lending.
‘The plans of the FLS participants suggest that net lending volumes will pick up gradually through the remainder of 2013.’
Adam Tavener, chairman of Clifton Asset Management says that a perceived lack of demand for business funding from the traditional lending sector is ‘at complete odds’ with what the alternative funding sector is experiencing.
Tavener says that peer-to-peer lending is expected to be worth some £500 million this year, with pension-led funding having already hit £250 million and recent figures show that invoice discounting has risen 16 per cent year-on year.
He says that being turned down by a bank should not dissuade business owners but rather move them towards such alternative fundraising options.
Tavener says, ‘More needs to be done to make company owners and directors aware that a ‘no’ from the bank doesn’t mean the end of the road for their funding options or their business.’