Project Merlin reveals five major UK banks not meeting lending targets

News Article - 27 May 2011
Category: Business

The Bank of England is set to publish its latest report on UK banks' lending figures to businesses, with the data expected to show the biggest banks are failing to meet lending targets set under the Government's Project Merlin agreement.

As part of Project Merlin, Barclays, Royal Bank of Scotland, Lloyds, HSBC and Santander pledged to lend £190 billion throughout 2011, but business experts reveal banks are £2 billion behind on lending to small and medium-sized businesses following Q1 2011.

Collectively, lending in the first three months of the year is expected to show a shortfall of up to 12 per cent and Business Secretary Vince Cable has warned the banks that they could be stung with higher tax rates if they did not improve their rate of business lending.

"There is a serious problem with lending to good, small companies. We looked to the Merlin agreement to rectify the problem and … we want to see significant improvement over the next few months," said Mr Cable.

However, BBC business editor Robert Peston believes the Government will be forced to give the banks the full year to meet official lending targets.

"Even though ministers regard it as vital to the UK's economic recovery that the banks provide adequate finance to small business, the Government won't punish the banks at this juncture, because the official lending targets are for lending over the course of the full year not in the quarter," said Peston.

Many small business owners are being forced to hold back expansion plans due to lack of funding from banks. A recent survey of members of the Federation of Small Businesses (FSB) found that only 16 per cent had approached their banks for credit and 44 per cent of those had their applications declined.

As a result, cash flow forecasting and financials reporting is more important than ever. Many small and medium-sized enterprises (SMEs) now choose to implement integrated accounting software to improve the efficiency of their strategic financial decisions.

Article keywords: Office for National Statistics, ONS, construction industry, Construction Products Association, CPA, Michael Ankers, George Osborne, Chris Williamson, Markit, housing sector, civil engineering sector, construction industry business systems, integrated business system, estimation and valuation software

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