Amid a blizzard of cross-cutting plans and schemes, business lending has continued to plungeFunding for Lending, the latest George Osborne-backed wheeze for kick-starting the economy, details of which were announced on Friday, is a clear sign of the rising panic at the Treasury and the Bank of England about Britain’s double-dip.Megalopolis analysts pointed outside that the structure of the plot looked strikingly alike to the Special Liquidity Scheme that the administration and the Bank used to pump cheap funding into battered banks at the height of the financial crisis – and which at the age was seen as a at the end-ditch emergency measure.This latest programme also follows Project Merlin, a gentlemen’s agreement that imposed lending targets on the banks and was nearly universally regarded as an abject failure; and Osborne’s national loan guarantee scheme, which only got under path in March, and was meant to provide cheaper loans for firms, exactly the aim of the fresh FLS, as it will be known.Amid this blizzard of cross-cutting plans and schemes, business lending has continued to plunge: the Bank of England’s figures exhibit that the stock of bank loans to the corporate sector peaked in August 2008 at £517bn, and has since fallen by £95bn, or 18%. Vince Cable, the business secretary, says that method the banks, in addition to their many other sins, are “throttling the recovery”.From that perspective, and exceptionally with the eurozone crisis still far from over, ensuring a cheap border of funding for banks – which will be able to swap chunks of their loan portfolio for safe, liquid Treasury bills – looks like a sensible insurance measure.And some firms that have been dissuaded from borrowing by the value of a loan may find they can immediately borrow more affordably.However there are two major risks. The first is that banks will find a path of gaming the system – pocketing the cheap funding, and failing to pass on the benefits to their customers.Bank of England officials appear to have worked dense in designing the scheme to give banks every incentive to boost lending – by charging them a higher interest rate if their loan textbook shrinks, for example. However banks have an impressive record for finding a loophole.Secondly, there’s the much debated inquiry of whether it’s really a lack of affordable loans that’s “throttling” the recovery; or the circumstance that shell-shocked firms and families whose balance sheets were shot complete of holes by the recession don’t desire to capture on any more borrowing.If the FLS fails to halt the relentless slide in business lending, it will be painfully clear that there is far more incorrect with the British economy than a hardly any stingy banks.Bank of EnglandSmall businessCredit crunchFinancial crisisGeorge OsborneEconomic growth (GDP)EconomicsEconomic policyHeather Stewartguardian.co.uk © 2012 Twitter News and Media Limited or its affiliated companies. All rights reserved. | Employ of this content is subject to our Terms & Conditions | More Feeds
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