The news broke in June that UK lending rates are continuing to plummet – and it’s left us convinced that the Funding for Lending Scheme (FLS), aimed at encouraging banks to lend, is a failure.

We believe the latest figures – showing net lending by banks using the FLS fell by £300m in the first quarter of 2013 despite most banks drawing from the central pot – prove the scheme is only benefiting banks.

Furthermore, the false inflation of banks’ balance sheets by the FLS is having a detrimental effect on high street savings rates, leaving most savers with cash piles that are diminishing in value against inflation.

Simply put, FLS isn’t benefiting small firms, and it isn’t benefiting savers. It’s a botched attempt at reinvigorating lending and has been inexplicably extended until 2015.

When FLS was announced we warned that it would be disastrous for savers. When the scheme was extended we said it would only benefit the banks. The latest figures confirm this view, but there is no pleasure to be taken from that: FLS is a well-intentioned but ill-conceived attempt at making the banks help small firms with their cash-flow, and it is, so far, not working.

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