Tough times for George Osbourne and Project Merlin
There’s more bad news for Chancellor George Osborne this week as it is forecasted that the Coalition Government’s much-lauded
Project Merlin – the flagship initiative to increase small business lending - is set to miss its first set of targets.
Indeed, a recent poll showed that over 75 percent of small business had seen no increase in approaches from banks since Project Merlin's launch.
Preliminary figures released by the Bank of England show that UK banks lent approximately £16.8bn to small business during Q1 of the 2011 Merlin agreement - £2.2bn lower than its publicised target.
According to the data, while overall lending reached £47.2bn in Merlin Q1– closer to the target figure - lending is still around £300m short.
David Frost, Director General at the
British Chambers of Commerce, said: “The long-standing challenge around small business lending remains. Throughout the recession and even now, businesses tell us that their relationships with banks have suffered tremendous strain. There has been a crisis of confidence between businesses and banks created by years of over-centralised processes, opaque decision-making and a lack of good local relationship-managers available to businesses customers.
“Missed targets to lend to small businesses are disappointing, but they are only a part of the story. Banks have to think about how they talk to business customers and be ready to make decisions at a local level about their financing needs. Encouraging businesses who may have been dissuaded by headlines around a lack of credit, to apply for finance is essential. Improving business lending relies on banks providing greater transparency and local support, not just national targets and numbers.
“We’re encouraged by the measures put in place by the
Business Finance Taskforce, to help UK business thrive and grow. Money must reach the most productive parts of the economy. But transforming the relationships between banks and business customers will not happen overnight. Rebuilding trust will rely on banks, politicians and businesses working together to change for the better.
Merlin was announced by the George Osborne in February 2011, following lengthy negotiations with the major banks. The arrangement has remained a key topic of debate ever since, with many experts suggesting that Merlin does not provide a viable solution to the business lending problem.
Britain’s banks have so far declined to comment on the figures; however, the Treasury has moved to defend them, telling
City AM it is “encouraging that the banks are broadly on track” to meet their targets.
The Treasury spokesperson also admitted that, while it would be “disappointing” for the banks to fall behind schedule in the Merlin programme, “it is still early days.”