Business loans ‘missing targets’

The government wants banks to lend more to firms

The latest figures on how much UK banks are lending to businesses are due to be published later by the Bank of England.

They are expected to show that the five biggest banks are not meeting the lending targets set under their Project Merlin agreement with the government.

Under Merlin, Barclays, Royal Bank of Scotland, Lloyds, HSBC and Santander have pledged to lend £190bn in 2011.

However, the BBC’s Robert Peston says banks are £2bn behind on small business lending in the first quarter of 2011.

Our business correspondent says of the £190bn for 2011, £76bn of credit should be made available to small and medium-sized businesses (SMEs) this year.

However, lending in the first three months is expected to collectively total £16.8bn compared with a de facto target of £19bn – a shortfall of about 12%.

Last week, Business Secretary Vince Cable warned that the banks could face higher taxes if they did not raise their business lending.

But Robert Peston said it was unlikely the banks would be punished because they still have the rest of the year to raise lending.

The Merlin deal was agreed back in February, and the combined £190bn target compares with the £179bn the banks collectively lent in 2010.

The British Bankers’ Association has repeatedly said that its members are doing all they can to increase lending.

At the same time, business organisations such as the Federation of Small Businesses say its members are continuing to struggle to get bank loans and other credit.

Mr Cable said last week that he expected the banks to miss the lending targets, and that they would have to make up any lending shortfall over the rest of the year.

“It’s a deal with the banks,” he said.

“If the banks don’t deliver, there are options open to the government, including taxation.”

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