The five biggest UK banks lent just £2 billion to businesses in the first three months of 2011
The ‘Big Five’ banks in the UK have lent just £2 billion to businesses in the first quarter of 2011, despite having promised a huge increase in lending throughout the year.
The Bank of England released new figures recently, saying that the situation for entrepreneurs seeking funding is only likely to get worse. The amount loaned to small businesses has been falling for 17 months, although February 2011 saw the largest decrease to date – a drop of three percent since February 2010.
The ‘Big Five’ – Barclays, Lloyds, Santander, HSBC and the Royal Bank of Scotland – promised to lend a total of £190 billion to businesses in 2011, £76 billion of which was to be lent to small businesses, an increase of £10 billion from 2010, as part of the Government’s Project Merlin. However, the total lending for 2011 from January to March was just £2 billion across businesses of all sizes.
Lord Oakeshott, the former Liberal Democrat Treasury spokesman who resigned in protest over Project Merlin, said: “The smaller your business, the worse the bank non-lending horror story gets. Lending to small companies keeps going down, and the cost of loans keeps going up. The banks pulled the wool over the Government’s eyes on Project Merlin. The banks are failing small business and failing Britain.”
According to the Forum of Private Businesses, decreased levels of lending will impair small business owners’ ability to hire new staff and create economic growth. Their recent research indicates that only 22 percent of small businesses are expecting to hire new staff in 2011.