Fury as big banks fall short of small-firm loan targets

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Under the Merlin deal in February between the big five High Street lenders - Royal Bank of Scotland, Barclays, Lloyds Banking Group, HSBC and Santander - and the Government, the banks promised to lend more to firms.

Today's figures showed lending to small and medium-sized enterprises was £16.8 million in the first three months of this year - that is
£2.2 billion short of the £19 billion quarterly target.

The banks undertook to increase their lending to SMEs by £10 billion to £76 billion this year.

John Walker, chairman of the Federation of Small Businesses, said: "It is not surprising the banks have not met lending targets to small firms. A recent survey of our members found that only 16% had approached the bank for credit and of those 44% had been refused."

Phil McCabe, senior adviser at the Forum of Private Business, said: "The banks say demand is down, but there is still a clear and pressing need for affordable growth finance - the problem is that business owners are becoming increasingly alienated by their appalling treatment at the hands of the UK's major lenders.

"Even when funding is made available, many of our members report extortionate interest rates and risk criteria bordering on the punitive."

On the wider criteria of lending to all business the five Merlin banks came closer to their pledge with gross lending of £47.3 billion, just £200 million under target.

A spokesman for the Merlin banks said: "These numbers demonstrate the determination of the Merlin banks to lend to viable businesses - it has been a solid start to the year. Demand in some sectors, particularly among SMEs, remains muted, but we are devoting considerable time, effort and resource to ensure that we help viable businesses to access finance."

The FSB's Walker said: "Lending targets by their very nature miss the big picture, and unless there is a fundamental shift in the make-up of the banking sector in the UK, small firms will continue to struggle to access affordable finance.

"The Independent Commission on Banking must go further and push for far greater competition in banking."