Small-firm lending £1bn short of target

The UK’s top banks were nearly £1bn behind their Project Merlin target for lending to small businesses at the end of September, official figures reveal.

Barclays, Royal Bank of Scotland, Lloyds Banking Group, HSBC and Santander UK lent £56.1bn to small and medium enterprises (SMEs) in the first nine months of the year, the Bank of England said.

Under the Project Merlin agreement the banks said they would increase lending to SMEs to £76bn this year, which equates to £19bn in the first quarter, or £57bn by the end of the third quarter.

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However, the banks are on course to beat the target of £190bn for gross lending to all businesses, including SMEs, after extending £157bn in the first nine months of the year.

Terry Scuoler, chief executive of EEF, the manufacturers’ organisation, said it was concerning that the target for SMEs, which face the most difficulties accessing finance, was not quite being met.

The Merlin agreement, revealed in February, followed protracted talks between the top five banks and the Treasury.

After the Bank published the figures yesterday, Business Secretary Vince Cable said: “Today’s figures show that while there is still much work to do, positive progress is being made on the quantity of bank lending available to businesses and they are on track to deliver more this year than before.

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“It is vitally important to our economy that small firms can get access to the finance they need. The banks have agreed to lend £76bn to small and medium-sized enterprises this year and I will be monitoring their performance.”

The UK’s top five banks all provided third quarter trading updates in the past four weeks and all said they were on course to meet the Merlin targets.

Federation of Small Businesses national chairman John Walker said the Merlin targets did not address underlying problems in banking and called on the Chancellor to introduce credit easing.