Lloyds set to beat £1bn lending target to companies

Lloyds, 39 per cent owned by the government, said it had lent £700m to manufacturers in the past six months, following the launch of its Manufacturing Commitment last September.

“We have already seen a great appetite from manufacturing businesses that want to invest and expand even in these uncertain times,” David Oldfield, head of SME and mid-market banking at Lloyds, said.

Lloyds is using the Bank of England’s flagship Funding for Lending (FLS) scheme to offer firms a 1 per cent reduction in the interest rate for new business loans. The offer applies for the full term of the loan and to businesses of all sizes.

The scheme was launched by the central bank and finance ministry last June to aid growth by offering banks cheap funds if they stepped up lending to home-buyers and small and medium-sized businesses.

However, it has failed to stop an overall decline in bank loans. Although banks and building societies have drawn down almost £14bn of cheap central bank funds, net lending has gone into reverse. In the last three months of 2012, Lloyds’ cumulative net lending fell by £3.1bn.

Like other banks, Lloyds is under pressure to increase lending but faces a juggling act as it must also strengthen its financial position to meet demands from regulators.