Vince Cable wants a ‘significant improvement’ on lending to SME’s
Business Secretary Vince Cable has reportedly said he wants a “significant improvement” after data showed UK banks are behind track in their lending to smaller firms.
Bank of England figures show that in the first three months of 2011, the top five UK banks loaned £16.8bn to small and medium-sized (SMEs) companies.
Under a deal with the government, the banks had agreed to lend £76bn to SMEs in 2011 - equating to £19bn a quarter.
The banks said that the latest data demonstrated a “determination” to lend.
However, Mr Cable pledged to examine “further action” if bank lending did not rise.
Under a deal called Project Merlin, Barclays, Royal Bank of Scotland, Lloyds, HSBC and Santander promised to lend £190bn to businesses in 2011.
Of the £190bn, some £76bn of credit should be made available to SMEs this year, about £19bn every three months.
Meanwhile, gross lending to all companies in the quarter was £47.3bn, which means that the banks are on course to meet their overall target of £190bn.
In a statement, the Merlin banks pointed out that these were still early days for the agreement.
However, many small firms report that a bank credit remains hard to obtain, with viable companies under threat because they cannot get loans.
Mr Cable agreed that just one quarter’s figures were not conclusive, but said: “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.
“We will monitor the banks’ performance extremely closely and if they fail to meet the commitments they have agreed we will examine options for further action,” the business secretary told the national press.