Scheme gives new business financial kick

A former Kung Fu school has undergone a £600,000 transformation into a restaurant with support from the government-backed Funding for Lending scheme.

Entrepreneur Steve Chan has opened Sky Chinese Cuisine Limited based in Stowell Street, the heart of Newcastle’s China town area, backed by support from Barclays.

He said: “The timing of this investment could not have been better and the cash-back payment from Barclays will provide a buffer to help manage finances over the quieter winter months in the New Year.”

Earlier this week new data showed that the six banks and building societies that used the Funding for Lending Scheme actually sucked £1bn out of the economy – instead of boosting it - in the three months to September.

One leading City chief executive was quoted in the Guardian as calling the scheme a "white elephant" after the first data showed that in the three months to the end of September just £500m of lending was released by all the 35 banks and lenders signed up for the scheme, which was launched in the summer.

Only six banks and building societies actually used any funds from the FLS in the three months to the end of September and their net lending – which takes account of loans being repaid – was negative by £1bn because customers repaid existing loans faster than new loans were granted.

However the biggest injection of credit came from Barclays – at £3.8bn. Martin Griggs, relationship manager, Business Banking at Barclays, who was involved in the deal behind the new Newcastle restaurant, defended the scheme.

“Barclays hopes that Funding for Lending will create one of the most competitive loan markets in recent history and expects the UK ’s leading banks to offer different cheaper lending products which will help fuel demand and competition,” he said.