UK leasing firms in government talks over FLS credit scheme

LONDON Mon Apr 22, 2013 7:12pm BST

Britain's Chancellor of the Exchequer George Osborne (L) talks with Bank of England Governor Mervyn King (R) as they arrive for an International Monetary Fund (IMF) governors group photo during IMF and World Bank spring meetings in Washington, April 20, 2013. REUTERS/Jonathan Ernst

Britain's Chancellor of the Exchequer George Osborne (L) talks with Bank of England Governor Mervyn King (R) as they arrive for an International Monetary Fund (IMF) governors group photo during IMF and World Bank spring meetings in Washington, April 20, 2013.

Credit: Reuters/Jonathan Ernst

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LONDON (Reuters) - Leasing companies are in talks with the government and the Bank of England about extending a flagship government credit scheme to enable the firms to offer more finance, a trade body said on Monday.

Britain launched the Funding for Lending Scheme in August in order to boost investment in the country's stagnant economy. The scheme offers banks cheap credit if they increase lending to households and businesses, but so far the benefits have gone mainly to banks and home-buyers rather than small businesses.

On Friday chancellor George Osborne told reporters in Washington that he would announce changes to the scheme "fairly shortly", leading to media speculation about what he was planning.

Osborne is under pressure to find ways to boost the economy before a visit next month from the International Monetary Fund, which is close to recommending that he scale back his austerity programme in order to support growth.

One option would be for the FLS to be extended to cover all leasing companies - also known as asset finance firms - which rent assets such as machinery to companies that cannot afford them outright.

On Monday the industry's trade body, the Finance & Leasing Association (FLA), confirmed that it was in talks with the government.

"The FLA is in on-going discussions with the government and the Bank about the operation of the Funding for Lending Scheme in the business equipment finance market," Julian Rose, head of asset finance at the body, told Reuters.

"We look forward to seeing the government's proposals when they are published," he added.

Spokeswomen for the Bank and the finance ministry declined to comment on Monday about the details of any possible extension to the scheme.

The FLA's members include subsidiaries of banks such as Barclays, BNP Paribas and Lloyds as well as financing units of industrial firms such as Siemens and General Electric.

Excluding high-value items such as ships and planes, the FLA said that the outstanding value of leased goods rose by 2 percent in 2012 to 45 billion pounds.

More than 90 percent of that was leased to small or medium-sized companies with 250 or fewer employees and annual turnover below 50 million euros, it estimated.

(Reporting by David Milliken; Editing by Ruth Pitchford)

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