Banks miss small business lending targets for the first quarter

Lending to small and medium-sized businesses fell more than £2bn short of targets set as part of the Project Merlin deal Britain’s major banks have sparked anger from business groups and anti-poverty campaigners after they failed to meet lending targets set by the government in return for ministers shelving extra taxes on executive bonuses. According to industry figures, bank lending to small and medium-sized businesses fell more than £2bn short of targets set by the Treasury as part of the Project Merlin deal signed in February. David Cameron said that while it would be “a bit hasty” to rush to conclusions, he warned that if banks did not “live up to their side of the bargain” on lending, the government would not have to live up to its side – indicating that the banks could face new taxes if they persist in their failure to meet targets. The shortfall could almost wipe out a £10bn boost to small business borrowing this year predicted by the chancellor George Osborne when agreed wide-ranging commitments from banks on providing extra lending. Bank of England figures revealed that banks fell £2.2bn short of the £19bn they were due to lend small and medium-sized enterprises (SMEs) in the first three months of the year. The British Chambers of Commerce warned the situation was unlikely to improve while banks continued to impose high charges for overdrafts and loans. It said businesses also suffered from centralised decision-making over lending that ignored local needs. The Robin Hood tax campaign, which heads a group of charities in favour of a tax on financial transactions, said the bank lending figures showed the government deal was “more Mickey Mouse than Merlin” and doomed to fail. Analysts said Merlin appeared to have done little so far to end the standoff between small businesses and the banks, with each blaming the other for the lack of loans and credit facilities. The British Bankers’ Association, which is representing all the banks signed up to Merlin, said the banks created a lending facility but businesses chose not to use it. Under the agreement, five high street banks – Barclays, Royal Bank of Scotland, Lloyds, HSBC and Santander – pledged to increase lending to small and medium enterprises to £76bn this year, which equates to £19bn in the first quarter. The figures showed the banks were on course to meet overall business lending targets of £190bn this year, equal to £47.5bn for the quarter, as they lent £47.3bn in the period. However, lending to SMEs fell short at only £16.8bn. Santander is the only bank to have revealed its own lending commitments under the Project Merlin agreement – and is currently on track to hit its targets. A Santander spokeswoman said: “We have pledged to lend £6.7bn to British businesses this year, with £4bn set aside for SMEs. “During the first quarter we provided £2bn of new lending, of which £1.1bn was for SMEs, keeping us well on track to deliver this commitment.” Project Merlin Banking Executive pay and bonuses Lloyds Banking Group Royal Bank of Scotland Barclays HSBC Banco Santander Phillip Inman guardian.co.uk

Posted by on May 23, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.