While political spats over employment law continue to boil over between Adrian Beecroft and Vince Cable, and reducing red tape still seems a long way off, it is encouraging to hear that a building society is coming up with plans to lend to SMEs. Building society Nationwide has just posted a 10% rise in underlying profits (there’s that ‘underlying’ again), to £304m, with a 10% rise in underlying income (oh!) to £2.1bn.
Nationwide’s statutory profit tells a different story: a drop of £114m to £203m from last year doesn’t look as good as the ‘underlying’ figures that it insisted on using in the key highlights of its financial statement. Nonetheless, chief executive Graham Beale said the bank plans to ‘play our role in supporting the UK economy and to continue to invest to deliver improved levels of service, efficiency and product choice.’ That counts as jargon in our book, but the business community will surely welcome any organisation’s plans to lend to SMEs.
The loans will not be available until late 2013, but the mutual has a respectable track record for lending. Its gross mortgage lending increased by 44% to £18.4bn in the year to 4 April, but the mortgage lending market increased just 5%. Meanwhile, the big five banks – which all signed up to the government’s Project Merlin agreement to get them lending more – actually missed their lending targets to small businesses by more than £1bn. Well done Nationwide for showing up the big boys.
Obviously it is a good idea to have a more diverse small business loans market, but it is just possible that Project Merlin failed because there is a lack of demand for the loans, rather than because banks weren’t offering them. Many businesses will prefer to save than borrow, mostly as a direct result of the current economic circumstances. But in the case of Nationwide, we won’t know if it’s working for another 18 months. The recession will probably be over by then, fingers crossed…