Bank lending figures for small businesses are disappointing

Today’s figures are disappointing. Just at the time when we need small and medium sized businesses to grow so we can get our economy moving again, it is worrying that bank lending to small businesses is falling short.

It is early days, but three months on the signs are that the Project Merlin plan is not working. And while the banks are understandably blaming this year’s economic slowdown for a lack of demand for new lending, businesses I talk to are fearful that the government is letting the banks off the hook.

When the Project Merlin agreement was first announced, I warned that the government’s deal with the banks was weak and toothless. George Osborne needs to explain to businesses up and down the country what more he will do to get the economy moving and get the banks lending to small businesses so that the government’s targets do not continue to be missed in the next quarter.

These figures can only further feed public anger that, as part of this deal, the Conservative-led government is giving the banks a tax cut this year while thousands of police officers are being cut and families on low and middle incomes are being hit hard by the VAT rise.

George Osborne should listen to Labour and repeat the bank bonus tax this year on top of the bank levy. We should use the money raised to build more affordable homes, support small businesses and create over 100,000 jobs. Getting people off the dole and back to work paying taxes is the best way to get the deficit down.

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Posted May 23rd, 2011 by Ed

3 Responses to “Bank lending figures for small businesses are disappointing”

  1. Langyboy says:

    Taxing the banks , the North Sea Oil Companies is not the answer, these taxes will only be passed on in higher charges to their customers.

    We need a better growth strategy to increase tax revenues through growth therefore reducing the need to pay people not to work, there are to many relying on state hand outs to survive. Benefits should be a safety net not away of life.

    The Banks will be reluctant to lend whilst the debt crisis hangs over Europe, we are going into a period of stagflation and until the politicians realise that the best solution to get the country growing and to formulate a high growth strategy.

    We also need to fire the Governor of the Bank of England, he is constantly undermining any confidence with his constant de-ramping of the British economy, we are all aware of the problems caused by the banking crisis. We need get the economy kick started by encouraging job creation and becoming less reliant on IMPORTS for our cheap product mentally.

  2. Iain Stewart says:

    Mr Balls,

    I agree Project merlin is not working! Not only the banks but HMRC are squeezing every penbny out of every business that they can in the current climate. I would like to share some of my experiences with the bank and how this is affecting a lot of small businesses that i speak or deal with.

    Firstly Banks are happy to lend where a) there is equity or security (at least 50% above the sums needed). the second criteria is that you are more likely to get funds if you already have borrowings from the bank at a historical low rate. The new loan is then secured and the borrower pays up to 12% more APR on the previous borrowings.

    Borrowing as little as £10k on an overdraft will cost up to 18% APR and usually the bank will only provide a temporary overdraft 1-3 months so you have to pay and arangement fee which increases the cost significantly higher than a one off annual overdraft facility – anything more than £10k now requires security (or a longer term loan facility at higher costs and fees).

    In my case HSBC will not appoint a business manager unless your turnover is greater than £1million or you have borrowings in excess of £30k. Everyone else is ‘fodder’ for the call centre – where is the support to small business?

    Just to rub salt into the wounds many small businessmen and wowen have sacrificed their personal credit status (defaulting on house loands or credit cards) to ensure that the business can survive and they too fall foul as the banks will use this a a rod to cain them.

    Trust me when I say the PR machine of the banks is good and politicians want to be seen to be helping but generalised comments do not help and very few politicins have taken the time to talk to small businesses that employ less than 10. We could easily double our workforce with some funding – we could have done that with bank funding but have had to look for equity investment – the government will now lose out on 40% of future corporate gains and my personal income will be restricted. I do not have an answer but to hear banks and politicians hark on about how much they are helping and resorting to public funding of building projects when reinstating the nursery funding which local authorities are culling by up to 50% would have a much greater impact on supporting those in and trying to get work. Every day another nursery is closed down or government funding pulled somewhere (set up a google search for a daily update).

    You are very welcome to visit and discuss the issues and I can supply plenty more examples locally,


    Iain Stewart

  3. Rabih says:

    Borrowing is record high ,no responce from the goverment yet , they seem to run away from failures and leave the masses wide open to face the consequences .

    It once again highlight the goverment’s wrong assesment to the current economical crissis, it also worryingly highlight strongly the fact that current goverment are unaware of the country’s economical structure which is worrying, judging th future challenges that the country have to ovecome and challenge

    Today food prices are record high ,with no restriction magers introduced as a usual no equivalent responce, high food prices and higher inflation rate a leathel combination that usually hits the poor hardest ,and yet to hear a responce is this regard.
    It is qiute clear,”sadly” that sooner rather then later, higher taxes will be introduced to add up on the all mentioned above

    The most worrying bit is that no one is capturing the momentum yet to counter these challenges , In spain masses went to the streets and staged a tent protests after non of the existing parties manged to contain thier anger and frustration, this type of expression or protest usually have unpredictable outcomes not necessary pleasent .
    We defnitley are going to face a very hot dry summer

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