Banks miss Project Merlin small business lending targets: The reaction
Posted by Dan Martin in Finances, Regulation on Mon, 13/02/2012 - 12:44
The Bank of England has confirmed that the UK's biggest banks missed the target imposed on them by the government for the amount of money lent to small businesses in 2011. Lending to SMEs reached £74.9bn, £1.1bn short of the target. It is believed that RBS, 82% owned by the taxpayer, was the only bank to miss its individual targets. Here's how the business community has reacted.
Anil Stocker, co-founder, MarketInvoice:
"The failure of 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.
"The government has no plans to impose further targets on the banks, and focus will instead shift to George Osborne’s ‘credit easing’ strategy, the details of which are likely to be released in next month’s Budget statement. Any policy that emerges as part of the new Budget must avoid crowding out recent innovations in the UK financing landscape. It is crucial that alternative mechanisms of finance provision be allowed to fuel competition in UK financial services, and that next-generation providers of SME funding be given support.
"Vince Cable’s taskforce on alternative finance has pledged to examine how best to make the UK business funding market more competitive and dynamic. This initiative represents a great opportunity to recognize the potential of alternative sources of finance to step in where the banks are falling short."
Peter Ewen, managing director, Venture Finance
"Despite Project Merlin’s promises to boost lending to SMEs, the banks fell short of expectations, particularly with regards to small businesses. As a result, many SMEs have not benefitted from the scheme and are still struggling and in need of cash.
"However, the banks are not entirely to blame as we are still clearly facing the problem of a depressed demand for any type of finance. Our own statistics show that almost a third of SMEs have no plans to invest in growth this year.
"Project Merlin had good intentions to help SMEs and boost the wider UK economy but it may have ended up being a box ticking exercise. It put SME lending in the spot light but it is telling that lending targets will not be imposed on banks going forward.
"The government should look at the business demand for finance and seek to encourage investment and growth if it is to bring the economy back to life."
Stephen Gildert, EMEA head of SME lending, Experian:
“Demand for finance from creditworthy small businesses is subdued. There was a great deal of hunkering down and managing for cash throughout the downturn, and many of those now looking to invest are turning to cash reserves in order to fund growth ambitions. Flexible forms of finance are very much the flavour of the day for those that do want credit.”
“Demand for finance from creditworthy small businesses is subdued. There was a great deal of hunkering down and managing for cash throughout the downturn, and many of those now looking to invest are turning to cash reserves in order to fund growth ambitions. Flexible forms of finance are very much the flavour of the day for those that do want credit.”
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