The Funding for Lending Scheme (FLS) launched by the Government / Bank of England last June as a way of ensuring quantitative easing finds its way into the wider economy rather than just the coffers of banks, is not making its way into the construction industry.

The scheme allows banks and building societies to access more than £80billion in cheap finance if they maintain or increase net lending to households and businesses. But it is estimated that only about £15billion had been drawn down by banks up to the end of last year and most of that had gone to mortgages rather than business investment.

FLS was supposed to increase business investment by allowing banks and building societies to use bundles of business loans or mortgages as collateral to access finance at a rate of about 1.25-1.5%. But lending to small & medium sized businesses (SMEs) is still falling.

One stone firm that has used the scheme is Portland quarrying and mining company Albion Stone, which last year reported profits up 73% on sales 27% ahead of the previous year.

Managing Director Michael Poultney told NSS: “We’re putting more into capital expenditure now than we have ever done.” A favourable interest rate of 1.5%, thanks to the Funding for Lending scheme, had persuaded Albion that the time was now right to invest.

But the FFL scheme has not led to extra business lending. The banks blame companies for being too cautious – which will amuse many companies that have been denied finance to facilitate trading, let alone investment.

Net lending to households and businesses was growing by more than 10% a year before the financial crisis – a rate which now looks disastrous and, with the benefit hindsight, was inevitably going to produce an economic bubble that had to burst.

Lending collapsed in 2008/9 and since then the overall rate of lending has been flat. But it is an increase in mortgage lending that is keeping lending even at that level, while the amount of money being lent to businesses, particularly SMEs, which were supposed to be main beneficiaries of FFL, has fallen.

Of course, an increase in mortgage lending is good news if it leads to more housebuilding, which could kick-start growth. And housebuilders do seem to be poised to increase their level of activity – click here to read 'Housing poised for recovery'.