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British firms more upbeat on economy, credit scheme helping: lobby

Confederation of British Industries (CBI) Director General John Cridland listens to London Mayor Boris Johnson speaking at the CBI annual co
Confederation of British Industries (CBI) Director General John Cridland listens to London Mayor Boris Johnson speaking at the CBI annual co

LONDON (Reuters) - British companies have grown more optimistic about the economy in recent months as a recovery, increasingly aided by a central bank funding scheme, is gathering pace, a leading business lobby said on Monday.

The Confederation of British Industry (CBI) said businesses' view of the future had shifted slightly, although it kept its forecasts for the country's economic growth unchanged from February at 1 percent in 2013 and 2 percent in 2014.

"Amongst CBI companies, there's a general sense that the forward mood has brightened a little," John Cridland, CBI director-general, told reporters.

His assessment that the economy is moving "from flat to growth" chimes with surveys showing a strengthening in the services, manufacturing and construction sectors in April, building on a rebound in gross domestic product in the first three months of the year.

The CBI predicts that quarterly GDP growth will speed up from 0.3 percent in the first and second quarters of the year to 0.4 percent in the third and fourth and to 0.5-0.6 percent in 2014.

The Funding for Lending Scheme has had a positive, if so far uneven, impact on the economy and will support it further as the year goes on, according to the lobby, whose members employ around a third of Britain's private-sector workforce.

The Bank of England launched the scheme last year, providing banks with cheap funding to encourage them to lend in the hope it will boost the flow of credit to households and businesses and ease what it sees as a major brake on Britain's recovery.

Policymakers rejigged the scheme last month, giving banks greater incentives to lend to small and medium-sized firms, which complain they are starved of credit. They also extended it by another year until the end of January 2015.

Cridland welcomed the extension in particular, noting that it "inevitably" took longer for the money to affect loans to small firms than was the case with mortgages.

"But when I talk to small businesses, they are already seeing the benefit on cost (of credit), and lower cost leads to more availability," he said.

"And when I talk to banks ... they are quietly optimistic that, as the months go on, for them the Funding for Lending enables them to do more lending."

A majority of economists polled by Reuters after the lending scheme was revamped also said it would be effective.

(Reporting by Olesya Dmitracova; Editing by Hugh Lawson)

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