Big five banks fail in Project Merlin pledge
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Lending to small and medium-sized businesses under the Project Merlin scheme has fallen short of its £76 billion target, new statistics show.
Lending to small and medium-sized businesses (SMEs) under the Project Merlin scheme has fallen short of its £76 billion target, new statistics show.
Findings from the Bank of England shows that a total of £74.9 billion was lent during the 12 month period from 9 February 2011.
The figures, from the UK's five major banks (Barclays, HSBC, LBG, RBS and Santander) reveal that lending to SMEs was strongest during the second quarter of 2011 when £20.5 billion was distributed.
Despite the failure to meet SME lending pledges, gross lending facilities hit £214.9 billion for the period, 13 per cent above the committed amount of £190 billion.
Anil Stocker, director and co-founder of online invoice auction service Marketinvoice, says, 'The failure by the banks to make good on the agreement adds weight to the argument that setting such targets for lending to SMEs is ineffective, and that the banks are no longer the most efficient mechanism for distributing capital to small businesses.'
Stocker adds that as the government has no plans to impose further targets on the banks the focus will now shift to Chancellor George Osborne's 'credit easing' strategy.
Tracy Ewen, managing director of commercial finance provider IGF, says that Project Merlin was not the answer to bank lending problems and is worried about how long SMEs will have to wait before further measures are put in place.
The 'slow and pedantic nature' of bank lending is the chief concern of SMEs, says Tim Hawkins, commercial director at Centric Commercial Finance.
He adds, 'Although banks appear to be responding positively to funding applications, they are still taking far too long to make decisions, causing business owners an inordinate amount of distress.
'Furthermore we are hearing accounts of SMEs being forced to reject funding proposals because the terms offered to them are completely unacceptable.'