An extension to a Government-backed lending scheme designed to help small businesses get loans will have only a “marginal” effect on business lending and growth, a finance expert said.
The Bank of England and Treasury confirmed that the Funding for Lending Scheme (FLS), due to end in January 2014, will be extended for another year to 2015.
Banks will be given greater incentives to lend to small and medium-sized businesses, and creditors other than banks will be able to participate.
Since its launch in August, the scheme has been criticised for failing to boost lending.
The scheme is supposed to encourage banks to lend by offering them cheap loans as long as they pass them on to customers.
Banks have taken nearly £14bn from the FLS since it was launched last August, but lending from participating banks was lower in the final three months of 2012, Bank of England figures showed.
The revised funding scheme is designed to encourage banks to lend more by allowing them to borrow an extra £5 from the FLS for every £1 they lend to a small or medium-sized enterprise (SME).
In an effort to get banks to lend sooner, they will be able to borrow £10 in 2014, when the scheme is extended, for every £1 they lend in 2013.
Chancellor, George Osborne, said...