Banks' Merlin magic misses the mark

Project Merlin delivered more than £100bn of credit to UK businesses in the first half of the year, but it didn't do the trick for SMEs.

by Dave Waller
Last Updated: 12 Aug 2011
Lots of praise for the five major banks participating in the Government’s push to provide business with better credit – Lloyds, Barclays, Santander UK, HSBC and RBS, say they’ve met the lending targets set by Project Merlin (give or take): together, they lent £100.4bn to businesses over the last six months, against a target of £95bn. A commendable effort, given that the rest of Europe is going down the pan – but small businesses are feeling rather let down all the same. Doubly so, considering today’s insolvency figures.

Banks only managed to lend £37.4bn to SMEs – against a half-year target of £38bn. While Lloyds just beat its small business target, lending them £6.8bn and RBS said it had lent £15.5bn, HSBC fell short. Which is a shame: by now we all know how crucial it is to inject some vim back in our small business coffers. As such we can expect business secretary Vince Cable to come out saying that the banks still need to work that wand somewhat harder.

Obviously, banks have argued that £100bn isn’t a bad shot, given the economic backdrop. And, naturally, they brought up their usual excuse: namely, that small businesses haven’t actually asked for the money in the first place. Business’ response is, as usual, that the cost of lending is still too high. Although Barclays did point out that the current account balances of UK small business customers have increased by 41% this year. So perhaps SMEs are playing a cautious game, keeping their cash close rather than seeking more out to embark on bigger projects.

That said, insolvency figures seem to side with small businesses: according to the latest from the Insolvency Service, the number of company liquidations in England and Wales rose by 4.4% during the second quarter of the year, to 4,233. That’s the highest number since late 2009. Proof, perhaps, that despite banks’ achievements on the lending front, for many, the cost of borrowing is still too high…

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