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    Bank of England confirms lenders failure on small business lending target

    By Harry Wilson | Telegraph – Tue, Feb 14, 2012 22:22 GMT

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    British banks missed their small business lending target of £76bn by £1.1bn, figures released by the Bank of England this morning confirmed.

    The five banks that 12 months ago signed up to the Project Merlin deal lent a total of £74.9bn to small and medium sized businesses in 2011 against a Government-set target of £76bn.

    Net (Frankfurt: A0Z22E - news) lending by the banks, including state-backed lenders Lloyds Banking Group (LSE: LLOY.L - news) and Royal Bank of Scotland (LSE: RBS.L - news) , shrank in every quarter last year, according to the Bank’s analysis of UK business borrowing.

    As expected, the Bank’s figures show that overall, the banks exceeded their gross lending target of £190bn by £24.9bn.

    “While meeting or coming close to the lending targets agreed in Project Merlin demonstrates banks are true to their word and are showing some intent to lend, the reality is that SMEs continue to be frustrated by the cost and terms and conditions around lending, with some opting out of using external finance altogether. This cannot be good for growth,” said Lee Hopley, chief economist of manufacturers’ organisation EEF.

    Capital Economics warned the figures showed the Project Merlin deal had failed in its objective of getting credit flowing freely to struggling businesses.

    “The Government seems to realise the limits of what these targets can achieve and is not going to set new ones for the banks this year. Instead, it is shifting its focus to “credit-easing” measures which, to be fair, have the potential to do more good than these simple targets,” said Capital Economics.

    Barclays (LSE: BARC.L - news) , Lloyds and Santander UK issued statements last week confirming they had met their Project Merlin targets. A spokesman for RBS yesterday denied the bank had tried “to fool people” over its performance and said it had met its lending target.

    Chris Leslie MP, the shadow Treasury minister, said: “It's obvious there is a shortfall on the official measure. Rather than trying to fool people into somehow thinking this is 'job done', banks need to acknowledge they have been spending more time securing their own balance sheets than helping growth and employment in small firms.”

     

    4 comments

    • Planet
      Planet  •  3 months ago
      ok, so they missed the target....what exactly is the consequence?
    • nailed
      nailed  •  3 months ago
      What?? Is this BOE chief serious??? What did he expect???? a CAP must be put on the lending rate. Whats and how does the BOE expect the banks to throw loans at 8.5% to the businesses????? Can someone email me this BOE governers email address??? I really need to understand what he is on about. He has reduced the Base rate for who exactly? I dont see any high street bank offering a loan at a rate near the base to anyone. Day light robbery and a single ticket to recession and unemployent.
    • Planet
      Planet  •  3 months ago
      Oh sorry, another liebour mp spouting, who should really be armed with the FULL facts....he will find that it was an EU directive for UK banks to reduce their balance sheets!!!!
      • Eddy T
        Eddy T 3 months ago
        He is a political sympathizer who support the loser in the last election.
    • Henry Goodridge
      Henry Goodridge  •  3 months ago
      Instead, it is shifting its focus to “credit-easing” measures which, to be fair, have the potential to do more good than these simple targets,” said Capital Economics.
      Reference the above extract from the article.
      Isnt easy credit that which produced the present debt problem?.The problem for the UK is that there is a lack of demand.The vast majority of individuals are skint or just about managing to keep their heads above water.Inflation over recent years has not helped.QE has not helped the man in the street in fact in many cases has reduced their spending power due to the artificially low interest rates available.Further inflation will materialise as a downstream result of QE as once the banks have built up their balance sheets using the "funny money" gifted by the MPC this money of a volume of 2 or 3 times that which was in circulation before QE raised its ugly head will flow into the system.What then?.Guess!
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