Where has £5.8bn gone?

The Funding for Lending Scheme really took off in the third quarter, according to figures released this week by the Bank of England.

Threadneedle Street said banks lent out £5.8 billion under the scheme during the three months to the end of September, a sharp rise on the figure lent during the previous three months.

Where has this money been going? Well, you don't need to be Hercule Poirot to see that it's gone the way of mortgages.

Over the course of 2013 rates on term loans have fallen to unbelievable lows, while criteria have relaxed and more people, especially first time buyers, are now managing to get loans.

However, while Funding for Lending has been a 'success' for the residential property market, it has had a negligible impact on businesses, especially smaller businesses. In fact, over the latest quarter, the figure showed negative net lending once again.

Paul Fisher, the Executive Director for Markets at the Bank, underlined this fact in his statement accompanying the data: "An economic recovery has taken hold. These data show that a significant improvement in credit conditions, aided by the FLS, is now feeding through to lending. But credit supply to businesses remains relatively subdued, especially to SMEs."

Now that the Funding for Lending Scheme is being refocused towards SMEs in 2014, it could be argued that the imbalance in lending to consumers and businesses will be ironed out. But is it that simple?

For me, it does seem that things have been done the wrong way round altogether. After all, what we now have is a property market that is steaming ahead and consumers who are newly confident.

But the foundations of any economy are its businesses. And right now, the vast majority of SMEs can sing for finance and credit from the banks, which is hindering their growth.

Many are languishing rather than expanding and my concern is that if the credit void carries on for much longer, the recovery could be materially damaged.

And then all the house price increases and restored consumer confidence could go up in smoke.

An economy and property market are nothing without a solid bedrock of business and that bedrock is still very much starved of the credit it needs to support a genuine recovery.

It does feel as if we've been building castles on sand. I hope I'm wrong.