The Bank of England directs funding to small businesses

From January 2014 the Bank of England and H M Treasury will redirect the Funding for Lending Scheme away from mortgage lending, and instead provide funding for hard pressed small businesses.

There has been significant press commentary about the likely “over-heating” of the UK property market. Basic economics would seem to dictate that if you increase demand, and do nothing (or very little) to increase supply, then prices will increase.

This has caused repeated “property bubbles” in the past. The Bank’s governor, speaking last week said:

“In the past year the Funding for Lending scheme has contributed to the recovery by helping to improve credit conditions significantly, especially for households.

“The changes to the scheme will refocus it where it is most needed – to underpin the supply of credit to small businesses over the next year – without providing further broad support to household lending that is no longer needed.”

Hopefully, this change will calm down the demand pressures in the housing market, and provide much needed working capital for small businesses.